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Over the Hedge: Do Exporters Practice Selective Hedging?

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  • Richard Fabling
  • Arthur Grimes

Abstract

What determines exporters’ exchange rate hedging decisions and do exporters attempt to “time the market?” We use a unique longitudinal dataset on firm exports to find the determinants of exporters’ currency hedging choices. Determinants include financial fragility, prior hedging experience, and natural hedge opportunities. We also find that firms alter their hedging ratios when the currency has recently trended in one direction. This behavior is ubiquitous for all but large firms and for all times other than when the exchange rate is near its extreme historical values. These results are consistent with most firms exhibiting (sub‐optimal) selective hedging behavior. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:321–338, 2015

Suggested Citation

  • Richard Fabling & Arthur Grimes, 2015. "Over the Hedge: Do Exporters Practice Selective Hedging?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(4), pages 321-338, April.
    • Handle: RePEc:wly:jfutmk:v:35:y:2015:i:4:p:321-338
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    Cited by:

    1. Håkan Jankensgård, 2019. "Does Managerial Power Increase Selective Hedging? Evidence from the Oil and Gas Industry," JRFM, MDPI, vol. 12(2), pages 1-18, April.
    2. Richard Fabling & Lynda Sanderson, 2015. "Exchange rate fluctuations and the margins of exports," Treasury Working Paper Series 15/08, New Zealand Treasury.
    3. Parker, Miles, 2016. "How exporters set prices: evidence from a large behavioural survey," Working Paper Series 1974, European Central Bank.
    4. Houldsworth, Elizabeth & Marra, Marianna & Brewster, Chris & Brookes, Michael & Wood, Geoffrey, 2021. "Performance appraisal and MNEs: The impact of different capitalist archetypes," International Business Review, Elsevier, vol. 30(5).
    5. Thethach Chuaprapaisilp & Nathapong Rujiravanich & Bovornrach Saengsith, 2018. "FX Hedging Behavior among Thai Exporters: A Micro-level Evidence," PIER Discussion Papers 81, Puey Ungphakorn Institute for Economic Research.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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