Stock Returns and Exchange Rate Volatility Essay

16727 WordsAug 12, 201567 Pages
Bachelor Thesis Bsc(B) 6. Semester Author: Jesper Klug Korsgaard Supervisor: Stig Vinther Møller Stock Returns and Exchange rate Volatility The Aarhus School of Business Maj 2009 Abstract This paper examines the relationship between firm value and exchange rate volatility. By using empirical approved theory, different multiple regression models is generated. Exchange rate volatility is then tested against stock returns, representing firm value. Recognizing earlier research limited success in finding a significant correlation this paper investigate a global industry, selecting 4 companies. Stock returns are then tested against the major currencies of the selected companies. Scrutinizing the history, financial record and strategy pursued of the individual companies offer some insights into the regression analysis. The findings suggest that stock returns are to a certain degree sensitive to exchange rate volatility and that being more selective in the sampling process gave more significant result than earlier research. ii Keywords Exchange Rate, Arbitrage Pricing Theory, Capital Asset Pricing Model, Stock return, Risk iii Table of Contents Abstract.....................................................................................................................................ii
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 List of Abbreviations ..............................................................................................................vii
 1
 Introduction

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