THE EFFECT OF EXCHANGE RATE VOLATILITY ON STOCK RETURN IN TAIWAN AROUND ABENOMICS
Journal Title: Asian Economic and Financial Review - Year 2017, Vol 7, Issue 4
Abstract
The purpose of this study is to investigate the relationship between stock returns, exchange rates and financial ratios in the automotive and integrated circuit industries in Taiwan around the introduction of Abenomics. We employ panel data from 34 listed companies on the Taiwan Security Exchange over the period 2011-2014. The Panel Smooth Transition Regression (PSTR) model is utilized to estimate the threshold of exchange rates and its effect on stock returns. The main finding of this paper shows that there exists an efficient hedge regime. When the Abenomics applied a policy of quantitative easing to instigate a sharp depreciation of the yen, the effects of the policies absolutely bring out benefit and competitive advantage of Japanese export industries. The depreciation of the exchange rate against other currencies would affect a country?s international competitive advantage or exports. If Taiwan exchange rate does not follow the depreciation of the yen and the levels of the exchange rate volatility in the automotive and integrated circuits industries in Taiwan are over 2.30% and 2.72% appreciation, respectively, the both industries will generate exchange losses and further influence the profit of the companies. Therefore, the main contribution of this paper is to provide a means for CEOs of companies in the two industries to exercise hedge options and evade the risk of exchange rate for their firms when the appreciation of currency are over 2.3% and 2.72% for automotive and integrated circuits industries, respectively.
Authors and Affiliations
Chien-Chung, Nieh| Professor, Department of Banking and Finance, Tamkang University, Taiwan, Hsun-Fang, Cho*| Ph.D. Student, Department of Banking and Finance, Tamkang University, Taiwan
Keywords
Related Articles
- EP ID EP2347
- DOI -
- Views 588
- Downloads 40
SYNCHRONIZATION OF ECONOMIC SYSTEMS WITH FRACTIONAL ORDER DYNAMICS USING ACTIVE SLIDING MODE CONTROL
Synchronization of chaos has widely spread as an important issue in nonlinear systems and is one of the most important branches on the problem of controlling of chaos. In this paper, among different chaotic systems the e...
AN EMPIRICAL ANALYSIS OF EFFECT OF PUBLIC DEBT ON ECONOMIC GROWTH IN INDIA IN THE POST-REFORM ERA
The present paper examines the causal nexus between public debt and economic growth for 15 NSC states of India for the period 1991-2015 using Dumitrescu Hurlin causality test. The panel causality test identified the endo...
TRANSACTION COSTS, MULTIPLE EQUILIBRIA, AND CURRENCY DEVALUATION
This paper attempts to examine the effect of a currency devaluation on domestic output by incorporating the Coase (1937) assertion into a standard open economy model. Our results show that there will be multiple equilibr...
DIVIDEND POLICY AND INFORMATION ASYMMETRY FROM THE SIGNALING PERSPECTIVE
This study attempts to examine the relevance of dividend policy and information asymmetry From the Signaling Perspective and Compare the relative information content of them. Based on sampling, 88 firms from Tehran Stock...
Economics and Business Department at Colorado College, 14 East Cache la Poudre, Colorado Springs
This paper aims to evaluate the impact of a microlending program on ameliorating measured poverty within its client population, with the aim of improving that impact. We analyze over 18,000 women micro-finance clients o...