Exchange Rate Exposure: Do Asymmetries and Volatilities Matter? Evidence from the Taiwan Stock Market

  •  R. F. Franck Varga    


This study investigates foreign exchange exposure and the impacts of asymmetries and volatilities on the daily returns of Taiwanese non-financial firms from 1990 to 2010. 88.8% of our samples are negatively exposed, companies benefiting from an appreciation of the domestic currency. 14% of the firms have an asymmetrical profile. If this percentage is not negligible, Taiwanese firms exhibit mainly a symmetric exposure. Currency volatilities have a significant impact for only 7.5% of the firms, but for 37.38% of the sample, we observe the existence of an asymmetric volatility. Among them, 65% exhibit a negative sign meaning that good news have a greater impact on the volatility than bad news, which seems counter-intuitive. These results may be explained by a chasing good news behavior and the effects of a high level of information uncertainty.

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