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A comparison of FX exposure estimates with different control variables

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  • Alain Krapl
  • Thomas J. O'Brien

Abstract

We compare the foreign exchange (FX) exposure estimates of four empirical models that differ only in the choice of control variable. We use a large sample of US equities (19 100) over a long time span (1980--2011). We find a much higher percentage of statistically significant FX exposure estimates with a bond return control variable than with a broad equity index. We also find that the FX exposure estimates with no control variable are close to those for the bond return control variable, and the estimates with Fama--French factor control variables are close to those with the equity index.

Suggested Citation

  • Alain Krapl & Thomas J. O'Brien, 2014. "A comparison of FX exposure estimates with different control variables," Applied Financial Economics, Taylor & Francis Journals, vol. 24(6), pages 437-451, March.
    • Handle: RePEc:taf:apfiec:v:24:y:2014:i:6:p:437-451
    DOI: 10.1080/09603107.2014.884698
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