Abstract
We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms’ foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.
| Original language | English |
|---|---|
| Pages (from-to) | 32-47 |
| Number of pages | 16 |
| Journal | Journal of International Money and Finance |
| Volume | 94 |
| Early online date | 30 Jan 2019 |
| DOIs | |
| Publication status | Published - Jun 2019 |
Funding
The views expressed in this paper are those of the authors and do not necessarily reflect those of the Financial Services and Markets Authority, the Federal Reserve Bank of St. Louis or the Federal Reserve System. We benefited from helpful suggestions of seminar participants at GREQAM, KU Leuven, the Federal Reserve Bank of St. Louis, Computational Economics & Finance 2018, and Université de Neuchâtel. We would like to particularly thank David Ardia, Sébastien Laurent, Frederiek Schoubben, Steven Vanduffel, Rosanne Vanpée and Raf Wouters. The authors thank Evan Karson and Joseph McGillicuddy for able research assistance. The authors remain responsible for errors. The authors gratefully acknowledge financial support from the Research Foundation Flanders (FWO research grant G023815N), the Hercules Foundation (Project No. AKUL/11/02) and the National Bank of Belgium.
| Funders | Funder number |
|---|---|
| Hercules Foundation | |
| Fonds Wetenschappelijk Onderzoek | G023815N |
Keywords
- Foreign exchange exposure
- High-frequency data
- Macro
