Dynamics of time-varying currency beta on Indian industries: A Markov switching approach

Document Type

Article

Publication Title

IIMB Management Review

Abstract

We examine the dynamics of time-varying currency beta across Indian industries. Through the Markov regime switching model we try to check whether currency beta is also regime-dependent, similar to other financial variables. The paper finds that currency betas are different in sign and magnitude for different industries. During different crisis periods, the nature of currency beta revealed different volatility for different industries. Results also exhibit strong evidence of regime switch behaviour of currency beta. The findings are important to hedgers and portfolio managers who want to hedge and diversify currency beta during normal and turbulent market situations in an emerging economy like India.

Publication Date

26-4-2023

Publisher

Elsevier

Volume

Vol.35

Issue

Iss.1

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