Abstract

This paper investigates asymmetric exchange rate exposure on Indonesia industry’s stock returns in both (non)linear specifications and different setting in exchange rate regimes and sub-sample periods using the EGARCH model. The results reveal that negative exchange rate exposure dominates over positive exposure in the linear exposure setting, but there is no dominance sign in nonlinear exposure effect specification. The negative exchange rate exposure is more pronounced in the episodes of Asian and Global financial crisis and largely reduces in tranquility period. In relation to exchange rate arrangements, many industries experience statistically significant negative exposure to the US dollar with managed floating exchange rate regime than flexible regime.