The Exchange-Rate Exposure of U.S. Multinationals

TLDR

The study investigates the determinants of U.S. multinationals’ exposure to foreign currency risk. The analysis shows that the link between stock returns and exchange rates varies across firms and is stronger for those with larger foreign operations.

Abstract

This article examines the exposure of U.S multinationals to foreign currency risk. Evidence is presented that the relationship between stock returns and exchange rates differs systematically across multinationals. Given these results, the study focuses on the determinants of exchange-rate exposure. The comovements between stock returns and the value of the dollar is found to be positively related to the percentage of foreign operations of U.S. multinationals. Copyright 1990 by the University of Chicago.