The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Foreign Exchange Exposure of Japanese Multinational Corporations
Published: 12/17/2002 | DOI: 10.1111/0022-1082.295575
Jia He, Lilian K. Ng
We find that about 25 percent of our sample of 171 Japanese multinationals' stock returns experienced economically significant positive exposure effects for the period January 1979 to December 1993. The extent to which a firm is exposed to exchange‐rate fluctuations can be explained by the level of its export ratio and by variables that are proxies for its hedging needs. Highly leveraged firms, or firms with low liquidity, tend to have smaller exposures. Foreign exposure is found to increase with firm size. We also find that keiretsu multinationals are more exposed to exchange‐rate risk than nonkeiretsu firms.
A Variance‐Ratio Test of Random Walks in Foreign Exchange Rates
Published: 06/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb02686.x
CHRISTINA Y. LIU, JIA HE
The separate variance‐ratio tests under homoscedasticity and heteroscedasticity both provide evidence rejecting the random walk hypothesis, using five pairs of weekly nominal exchange rate series over the period from August 7, 1974 to March 29, 1989. The rejections cast doubt on the random walk hypothesis in exchange rates, which has received support in the existing literature. Furthermore, since the rejections are robust to heteroscedasticity, they suggest autocorelations of weekly increments in the nominal exchange rate series, which may be consistent with the exchange rate overshooting or undershooting phenomenon.
Tests of the Relations Among Marketwide Factors, Firm‐Specific Variables, and Stock Returns Using a Conditional Asset Pricing Model
Published: 12/01/1996 | DOI: 10.1111/j.1540-6261.1996.tb05230.x
JIA HE, RAYMOND KAN, LILIAN NG, CHU ZHANG
In this article we generalize Harvey's (1989) empirical specification of conditional asset pricing models to allow for both time‐varying covariances between stock returns and marketwide factors and time‐varying reward‐to‐covariabilities. The model is then applied to examine the effects of firm size and book‐to‐market equity ratios. We find that the traditional asset pricing model with commonly used factors can only explain a small portion of the stock returns predicted by firm size and book‐to‐market equity ratios. The results indicate that allowing time‐varying covariances and time‐varying reward‐to‐covariabilities does little to salvage the traditional asset pricing models.
One‐Time Cash Flow Announcements and Free Cash‐Flow Theory: Share Repurchases and Special Dividends
Published: 12/01/1992 | DOI: 10.1111/j.1540-6261.1992.tb04691.x
KEITH M. HOWE, JIA HE, G. WENCHI KAO
The leading explanation for the positive price response surrounding tender offer share repurchase and specially designated dividend (SDD) announcements is the information signaling hypothesis. This paper reexamines these announcements to determine if Jensen's free cash‐flow theory also has explanatory power. Lang and Litzenberger's (1989) findings suggest an important role for the free cash‐flow theory in explaining the market's reaction to dividend changes. In contrast, we find the market's reaction to share repurchases and SDDs is approximately the same for both high‐Q and low‐Q firms. We thus have an empirical puzzle: If Jensen's free cash‐flow theory applies to dividend changes, it is difficult to see why it does not also apply to the analogous events examined here.