Abstract
The purpose of this research is to examine the foreign exchange risk exposure of listed corporations on the Shanghai and Shenzhen Stock Exchange from textile and garment industry over the period 25 July 2005 to 25 July 2008. The augmented Jorion Model is built to estimate the sensitivity of stock returns to exchange rate fluctuation. The findings are showed as follows: (1) Chinese textile and garment industry is significantly exposed to foreign exchange risk. About 26 per cent of firms in the sample have statistically significant exposures to the US dollar and European dollar whilst 44 per cent and 57 per cent are statistically exposed to the Hong Kong dollar and Japanese Yen respectively. (2) The appreciation of RMB-USD and RMB-JPY adversely affect firm returns, while firms are benefited from the appreciation of RMB-EUR and RMB-HKD. (3)The US dollar is the most dominant source of exchange risk among the major currencies, Hong Kong dollar, European dollar and Japanese Yen affect firm returns in turn.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
