Empirical reports of priced foreign exchange (FX) risk raise the question of whether managers should adjust their cost of equity estimates for FX risk. To study this question, we empirically compare the cost of equity estimates of several risk-return models, including some that have explicit FX...

Estimating co-movement measures for a large set of bilateral foreign exchange (FX) rates, I explore the relation between firm-level FX exposure and its time-varying diversifiability. For a sample of U.S. firms, the magnitude of FX exposure appears to increase during periods of low currency risk...

Using a single-factor Global CAPM (GCAPM) and a two-factor International CAPM (InCAPM), we study the effect of foreign exchange (FX) exposure on the term structure of industry cost of equity of 39 U.S. industries. Following Ang and Liu (2004), we estimate the term structure of industry expected...

To estimate foreign exchange (FX) cash flow exposure, one may choose between direct and indirect regression approaches, where the direct approach uses accounting-based cash flow data and the indirect approach uses equity returns as a cash flow proxy. The indirect approach typically includes one...

Using the framework of the International Capital Asset Pricing Model (ICAPM), we explore two central topics associated with equity foreign exchange (FX) risk premia. First, we estimate FX risk premia for a large cross-section of firms. Second, we study the diversifiability of FX risk. Using...

We analyze the effects of fair value reporting standards (FVR) SFAS 133 and IAS 39 on foreign exchange (FX) exposures of U.S. multinational firms. We observe reductions in FX exposures to developed market currencies that coincide with the implementation of FVR. Risk reductions mainly affect U.S....

This study analyzes foreign exchange (FX) cash flow and equity exposures of a sample of U.S. multinational firms. Focusing on asymmetry in FX cash flow exposures to direction and magnitude of FX shocks, the study finds that asymmetry is pervasive in several alternative measures of FX cash flow...