The Risk of Foreign Exchange Exposure of Stock Returns Concerning Non-Financial Listed Firms

Syed Muhammad Ali Tirmizi

Abstract:

The foreign exchange rate fluctuations do create an impact on stock returns, which has been investigated for non-financial listed Pakistani firms. The real effective exchange rate has been used as the true measure of foreign exchange exposure. The modelled econometric equation includes; firm size, firm liquidity, money supply and inflation as predictors of stock returns. Twenty-five non-financial listed firms have been evaluated for the study period 2004 to 2013, which signifies the military regime era proceeded by peoples party rule in Pakistan. Financial data analysis, including; ADF unit root and Johansen Co-integration tests, have been applied to evaluate financial data, which further led to correlation, descriptive stats and panel data regression analysis. The results have suggested a very weak relationship between stock returns and foreign exchange exposure. Therefore, sample non-financial listed firms have not been foreign exchange exposed; however, firm size, liquidity, money supply and inflation rates have definitely created an impact on stock returns.

research from:

• Foundation University - Faculty of Management Sciences

Year:

2021

Type of Publication:

Article

Keywords:

REER; stock returns

Journal:

global economics review

Volume:

6

Number:

1

DOI:

10.31703/ger.2021(VI-I).09