Analysis of economic exposure to the stock return

Changes in exchange rates have important implications for financial decisionmaking and firms' profitability. This paper empirically examines the effect of exchange rate exposure, particularly economic exposure, on firm's value, considering the firm size and holding period factor. This study employs regression which has developed from Fama & French Three Factor Model by adding a lagged variable exposure. However, this study could not find statistically significant relationship between economic exposure and stock return. In addition, this study found weak evidence in relationship of firm size and holding period in accordance to exposure level.