FOREIGN EXCHANGE RISK IN STOCK PRICING: A FURTHER STUDY OF ASIAN MARKETS

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Abstract

This study applies a two-factor asset pricing model (market and foreign exchange) to examine the stock pricing behaviors in export-oriented Asian markets (Hong Kong, Malaysia, the Philippines, South Korea, Taiwan and Thailand) for the period 1994-2005. The three foreign exchange risk factors are Japanese yen, US dollar and EURO. GMM test results indicate only the US dollar exchange risk factor is priced in Asian stock markets, i.e., the appreciation/depreciation of the US dollar should affect investors’ buying/selling decision to some extent. The empirical results are valid for both subperiods as well as the whole period.

Keywords: Asset Pricing, Foreign Exchange Risk, GMM

How to cite this paper: Liau, Y.-S., & Yang, J. J. W. (2008). Foreign exchange risk in stock pricing: a further study of Asian markets [Special issue]. Corporate Ownership & Control, 5(4-5), 444-450. https://doi.org/10.22495/cocv5i4c5p4