German Stock Returns: The Dance with the Dollar

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Abstract: The purpose of this paper is to shed some light on the association between the stock returns of German DAX corporations and movements of the U.S. Dollar. The link turns out to be rather unstable, but it depends significantly on direction and magnitude of foreign trade, and on the existing level of the DM/ Dollar exchange rate. This conclusion is based on exchange-rate-exposure and APT-modelling, as well as on panel data on the performance of 28 German DAX corporations, inclusion of macroeconomic risk factors, data on export and import involvement, and on econometric panel, GLS, SUR and cointegration techniques. Terms of use: Documents in EconStor may

German Exchange Rate Exposure at DAX and Aggregate Levels, International Trade and the Role of Exchange Rate Adjustment Costs

“…A complete model consists of the joint determination of factor sensitivities within the multifactor model and of risk premia, which reveal whether investors have to be compensated by a higher expected return because the exchange rate risk or other risks are not diversifiable. Non‐linear SUR of the complete model have been performed in Entorf and Jamin (2000) and Jamin (1999).…”

German Exchange Rate Exposure at DAX and Aggregate Level, International Trade, and the Role of Exchange Rate Adjustment Costs

“…A complete model consists of the joint determination of factor sensitivities within the multi-factor model and of risk premia, which reveal whether investors have to be compensated by a higher expected return because the exchange rate risk or other risks are not diversifiable. Nonlinear seemingly unrelated regressions of the complete model have been performed in Jamin (1999) and Entorf and Jamin (2000). 6 Note that due to the orthogonalization of the residual market factor and macroeconomic factors, CAPM boils down to be a simple parametric restriction of Arbitrage Pricing Theory.…”