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 554
- Downloads 40
DETERMINANTS OF NON-PERFORMING LOANS IN LICENSED COMMERCIAL BANKS: EVIDENCE FROM SRI LANKA
This study investigates the determinant factors of ex-post credit risk considering non-performing loans (NPLs) as proxy variable in Sri Lanka?s commercial banking sector and is carried out with a sample of nine licensed...
REGIONAL INTEGRATION AND FOREIGN INVESTMENT: THE CASE OF ASEAN COUNTRIES
The importance of regional integration in stimulating foreign direct investment cannot be overemphasized. With a special focus on the ASEAN countries, this research paper investigates the role of regional integration in...
U.S.-SINGAPORE COMMODITY TRADE AND THE J-CURVE
Limited number of studies that investigated the short-run (J-Curve) and long-run effects of currency depreciation on the trade balance of Singapore either used aggregate trade data between Singapore and rest of the world...
INFORMAL CAPITAL MARKET AND ENVIRONMENTAL FACTORS IN NIGERIA
Our environments are closely instutionalized with collections of human and material resources for the purpose of economic production and profitability. It was based on this premise that, this study sought to examine the...
CORPORATE GOVERNANCE AND INFORMATION TRANSPARENCY: A SIMULTANEOUS EQUATIONS APPROACH
The purpose of this paper is to review the relationship between corporate governance mechanisms and information transparency. In this paper, we aim to answer the important questions of whether corporate governance affect...