Abstract
This paper examines if the type of exchange rate used or size of the movement in the exchange rate matters in estimating exchange-rate exposure of U.S. manufacturing firms. We find that switching from a broad trade-weighted exchange rate to a 2-digit SIC industry exchange rate increases slightly the number of significantly exposed firms. We also find that firms’ stock returns may be affected differently in periods of crisis and non-crisis; some firms have significant exposure only in crisis periods while others have significant exposure only during normal fluctuations in exchange rates.
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