A. Khoo, ESTIMATION OF FOREIGN-EXCHANGE EXPOSURE - AN APPLICATION TO MINING COMPANIES IN AUSTRALIA, Journal of international money and finance, 13(3), 1994, pp. 342-363
Using stock.market data, this paper measures the foreign exchange expo
sure of mining firms in Australia, traditionally thought to be very se
nsitive to exchange rate movements. The estimation is conducted at sev
eral levels: single equation estimation for individual stocks and for
portfolios of stocks from the same industry group, and multivariate re
gression. The sensitivity of stock returns to exchange rate movements,
and proportion of stock returns explained by exchange rate movements,
are found to be small. Results from such analysis can be used to asse
ss the effectiveness of existing hedge policies, and the need for, and
benefits of, additional hedging.