INTERNATIONAL INVESTMENTS WITH EXCHANGE RATE RISK: THE CASE OF CENTRAL AND EASTERN EUROPE CURRENCIES (original) (raw)
2010
The paper investigates the impact that exchange rate risk has on the risk-return profile of investments in emerging countries. The emerging countries under scrutiny are Czech Republic, Hungary, Poland, Romania, Russia and Turkey, all from Central and Eastern Europe. We examine the importance of currency risk from the perspective of a US dollar based investor, by looking at the contribution
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Exposure to Foreign Exchange Rate Risk: A Review of Empirical Evidences
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Exposure to foreign exchange rate risk has become an increasingly important issue to investors and financial managers identical with the globalization of markets, and particularly in the wake of the events that occurred in the Asian financial markets. The impact of foreign exchange rate exposure on the value of the firm has been the subject of empirical literature for several decades. In recent times some empirical literature has also emerged. This study reviews the studies that investigate the exposure to currency risk of different economies. Both developing and developed economies has been subject to this study. It is concluded that most of the emerging and developing economies are exposed to higher level of foreign currency exposure. This is due to high level of openness and large amount of import and exports. In contrast, almost all closed and developed economies exhibits low level of exposure due to low amount of import and exports.
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