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| Author: | Allayannis, G. Ihrig, J. |
| Title: | Exposure and Markups |
| Journal: | Review of Financial Studies
2001 : AUTUMN, VOL. 14:3, p. 805-836 |
| Index terms: | FINANCE ANALYTICAL REVIEW MODELS MODEL TESTING |
| Language: | eng |
| Abstract: | This article examines how to properly specify and test for factors that affect exchange-rate exposure. Starting from theoretical underpinnings and a sample of U.S. manufacturing industries between 1979 and 1995, it finds that 4 of 18 industry groups are significantly exposed to exchange-rate movements through the effect of industry competitive structure, export share, and imported input share. On average, a 1% appreciation of the dollar decreases the return of the average industry by 0.13%. Consistent with the authors' model's predictions, as an industry's markups fall (rise), its exchange-rate exposure increases (decreases). The paper first describes the model; then it describes the empirical methodology and the data and afterwards presents the empirical tests and the results. |
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