<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>This paper assesses the benefits and risks of international investments made on the Romanian stock market, from the perspective of euro-based investors. We investigate the contribution of exchange rate volatility to the total risk of these investments over a period of nine years, between January 2011 and December 2019, by using monthly values for the exchange rate between the Romanian leu and Euro and monthly values of the Romanian stock index. Our findings indicate that, on average, Romanian leu depreciated against euro, causing currency losses for the euro-based investor, counterbalanced by the Romanian index mean return, higher than euro countries index mean return during the period under analysis. However, comparing the exchange rate volatility with the volatility of the local index market, we find that that exchange rate returns have lower standard deviations values, which may suggest that the exchange rate volatility does not seem to be an additional factor to the total volatility of the Romanian stock market returns denominated in euro. This conclusion is supported by the values obtained for lambda, a synthetic indicator which measures the proportion of the volatility attributable to exchange rate fluctuations from the total volatility of the euro-based investor returns. Combined, these results imply that currency risk has only a moderate and controllable influence on international investments made by a euro-based investor on the Romanian stock market</p>
</abstract>

This paper assesses the benefits and risks of international investments made on the Romanian stock market, from the perspective of euro-based investors. We investigate the contribution of exchange rate volatility to the total risk of these investments over a period of nine years, between January 2011 and December 2019, by using monthly values for the exchange rate between the Romanian leu and Euro and monthly values of the Romanian stock index. Our findings indicate that, on average, Romanian leu depreciated against euro, causing currency losses for the euro-based investor, counterbalanced by the Romanian index mean return, higher than euro countries index mean return during the period under analysis. However, comparing the exchange rate volatility with the volatility of the local index market, we find that that exchange rate returns have lower standard deviations values, which may suggest that the exchange rate volatility does not seem to be an additional factor to the total volatility of the Romanian stock market returns denominated in euro. This conclusion is supported by the values obtained for lambda, a synthetic indicator which measures the proportion of the volatility attributable to exchange rate fluctuations from the total volatility of the euro-based investor returns. Combined, these results imply that currency risk has only a moderate and controllable influence on international investments made by a euro-based investor on the Romanian stock market

Romanian Equity Investments and Currency Risk: A Euro-Based Perspective

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Romanian Equity Investments and Currency Risk: A Euro-Based Perspective"}

This paper assesses the benefits and risks of international investments made on the Romanian stock market, from the perspective of euro-based investors. We...

Romanian Equity Investments and Currency Risk: A Euro-Based Perspective

Publié en ligne: 26 mai 2021

Pages: 162 - 176

DOI: https://doi.org/10.2478/sbe-2021-0013

Mots clés
international investments, currency risk, Romanian stock market

© 2021 loana Radu et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Romanian Equity Investments and Currency Risk: A Euro-Based Perspective

Publié en ligne: 26 mai 2021

Pages: 162 - 176

DOI: https://doi.org/10.2478/sbe-2021-0013

Mots clésinternational investments, currency risk, Romanian stock market

© 2021 loana Radu et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
international investments, currency risk, Romanian stock market