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Comment on “Asymmetric Currency Exposure and Currency Risk Pricing”. Yuan-Chen Chang National Chengchi University. Summary of this paper. Use multivariate GARCH-in-mean approach to test whether currency risk is priced in the US market.
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Comment on “Asymmetric Currency Exposure and Currency Risk Pricing” Yuan-Chen Chang National Chengchi University
Summary of this paper • Use multivariate GARCH-in-mean approach to test whether currency risk is priced in the US market. • Provide empirical evidence that 58% of US industries and 90% of US banks are asymmetrically affected by USD/JPY movements.
Some observations • 1. The authors should explain why he chose those 12 industries from 72 level 6 industries for the US market? • Is there any criteria used by the author to choose these industries?
Some observations • 2. The author did not provide any explanation on why there are asymmetric exposures? A detailed examination of the hedging activities maybe necessary to distinguish the sources of asymmetric exposure. • 3. The author ignore possible interest rate risk factor for the banking industry.
Some more observations • 4. The authors can benefit from a cross-country comparison of the asymmetric exposure effect. • Japan VS US market
Final comment • I enjoy reading this paper and I think it has potentials to make a contribution to the current literature.