Exchange-Rate Exposure TABLE 2
339
Hypothesis Tests on Exposure Coefficients 082, January 1971-December 1987
F-Test (P-Value) Sample
Average No. Significant Hypothesis Exposure at 5% Level Equal 132 Zero 132 Stable 132
40 multinationalswith most dispersionin foreignoperations
-.049
3/40
1.8599** 1.8997** (.0009) (.0005)
40 portfolioswith most dispersionin foreignoperations
-.088
6/40
1.7834** 1.7454** 1.6254** (.002) (.003) (.0004)
40 firmswith lowest percentageof foreign operations
-.120
0/40
1.1816 (.203)
1.2910 (.104)
1.3086 (.034)
40 largestdomestic firmswith no reportedforeign operations
- .151
2/40
1.2676
1.3286
1.2101
(.123)
(.081)
(.099)
1.5892** (.0007)
40 firmswith highest percentageof foreign operations
.073
2/40
1.5787 (.012)
1.7400** (.003)
1.2395 (.073)
14 foreignfirms
.563
9/14
2.7818** 5.6477** (.0006) (.0001)
1.6408 (.018)
NOTE.-Systemestimatedby generalizedleast squares.The sampleconsists of 287 nonoilfirms, with foreign operationsreportedin Value Line, except for the foreignfirms and the "domestic" firms,whichare the largestFortune500 firmswith no reportedforeignoperations.The stabilitytest jointly tests the equalityof exposurecoefficientsover the subperiods1971-75, 1976-80, 1981-87. ** Significantat the 1%level.
lated to exchange-rate exposure may give nonzero coefficients, the tests were repeated for firms with little or no foreign involvement. Forty companieswere selected from the sampleof 287 with the lowest reportedforeign operations, rangingfrom 0 to 6% of total sales. As is apparent from table 2, the cross-sectional variability in exposure coefficients is much lower than before: the hypothesis of equal coefficients now cannot be rejected at the 5% confidencelevel. Given that multinationalsare among the largest U.S. firms, an alternative experiment was designed to control for firm size. A sample was collected with the 40 largest companies among the Fortune 500 without any reportedforeign operations. These domestic firmsbest match the Value Line sample of multinationalsin terms of size and also cover many different industries. As explained above, differing exposure coefficients may conceivably arise because of differingcross-sectional