The relationship between exchange rates and stock returns of European automotive companies

Xuan Chi Nguyen

Master's thesis

Abstract:

This thesis aims to examine the existence of relationship between exchange rates and stock returns of four European automotive companies during the period 2011 to 2015. The selected corporations are BMW, Volkswagen, Renault and Peugeot S.A Group, which are all world leading automobile manufacturers with huge volume of international transactions. This makes them to be exposed to high exchange rate risks, which would create a thread to their stock return – representative for the operating result, if these currency risks are not well managed. A multiple regression with the dependent variable as stock return, and explanatory variables as exchange rate along with other macroeconomic and firm-specific factors was applied to assess whether the stock return was affected by movements of exchange rates. The results reveal that there was no statistically significant linkage between these two economic variables, implying all these companies have been implementing effective hedging strategies on currency risks.

Abstract:

This thesis aims to examine the existence of relationship between exchange rates and stock returns of four European automotive companies during the period 2011 to 2015. The selected corporations are BMW, Volkswagen, Renault and Peugeot S.A Group, which are all world leading automobile manufacturers with huge volume of international transactions. This makes them to be exposed to high exchange rate risks, which would create a thread to their stock return – representative for the operating result, if these currency risks are not well managed. A multiple regression with the dependent variable as stock return, and explanatory variables as exchange rate along with other macroeconomic and firm-specific factors was applied to assess whether the stock return was affected by movements of exchange rates. The results reveal that there was no statistically significant linkage between these two economic variables, implying all these companies have been implementing effective hedging strategies on currency risks.

Keywords

Exchange rates, Exchange rate risks, Stock returns

Keywords

Exchange rate risks, Exchange rates, Stock returns

Language used: English

Date on which the thesis was submitted / produced: 16. 11. 2016

Thesis defence

• Date of defence: 14. 6. 2018
• Supervisor: Karel Brůna
• Reader: Ondřej Šíma

Vysoká škola ekonomická v Praze

Master programme:
Finance and Accounting