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Foreign Exchange and Oil Exposure of CEE Companies: Risks for Investors in Financial and Energy Industries

Author

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  • HOROBEȚ Alexandra
  • VRÎNCEANU Georgiana Maria

Abstract

The main aim of this paper is to analyse the exposure to exchange rate risk of 24 financial and energy companies from 4 Central and Eastern European countries, i.e., Romania, Hungary, Poland, and Czechia, using datasets covering the period between January 2010 and December 2017. The largest listed companies from financial and energy industries were selected by market capitalization and based on available data for this period. This study investigates the link between stock prices and a number of variables, such as stock market indices, monthly changes in the exchange rate of the domestic currencies to the EUR and USD, real GDP growth rate, Brent crude oil prices and 1-year bond yields. Applying the panel data methodology, the findings indicate that for both types of companies, when considering the stock market index, significant exposure to this variable is discovered. When excluding this variable from the equation at the financial companies, there is a significant exposure to the change in the exchange rate of the domestic currencies to the both EUR and USD and unexpectedly, to the oil price changes, fact that displays a remarkable result for the financial companies. The price of crude oil had a much greater impact on the stock prices of the financial companies than it was expected and at the same time, it seemed to be a risk factor. For the energy companies, when removing the stock market index from the equation, significant exposure is found to the change in the exchange rates of domestic currencies to the EUR and to the change in the price of oil. The exposure to Brent crude oil price turned out to be positive in both situations.

Suggested Citation

  • HOROBEȚ Alexandra & VRÎNCEANU Georgiana Maria, 2021. "Foreign Exchange and Oil Exposure of CEE Companies: Risks for Investors in Financial and Energy Industries," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 01, March.
    • Handle: RePEc:jis:ejistu:y:2021:i:01:id:464
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    currency risk; stock prices; stock market indices; panel data analysis; Central and Eastern Europe (CEE);
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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