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The Impact Of Thin Trading Adjustments On Exchange Rate Exposure

Gadjah Mada International Journal of Business (GamaIJB) · Vol. 24 No. 2 (2022) · pp. 127–150

DOI
10.22146/gamaijb.36806
ISSN
2338-7238, 1411-1128
Published
2022-06-02
Publisher
Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada
Language
eng
License
creativecommons.org/licenses/by-sa/4.0

Abstract

This study investigates the multiple exchange rate exposure of large non-financial firms in Asia and emerging countries using the unadjusted and adjusted two-factor exchange rate exposure model. The autoregressive-distributed lag (ARDL) method was applied to investigate the existence of exchange rate exposure. The Dimson-Fowler-Rorke (DFR) adjustment method was applied to adjust the ordinary least squares (OLS) market risk estimator for the thin trading phenomenon. The study’s findings indicate that exchange rate exposure does affect firm value. Incorporating the DFR market beta in the exchange rate exposure model indicates two important findings. Firstly, there is a significant increase in the number of firms exposed to exchange rate movements, especially in Indonesia, Thailand, Sri Lanka, and Vietnam. Secondly, there are more firms that will be exposed to multi bilateral exchange rate exposure across the sample countries. The findings imply that market characteristics such as thin trading could be an alternative explanation of the exchange rate exposure puzzle. Furthermore, future research should include asymmetric analysis as an alternative explanation for exchange rate exposure.

Keywords

Collaboration network of the authors

4 authors · 4 co-authorship links · 2 across different organisations

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  • Universiti Teknologi MARA
  • Universiti of Malaysia Sabah
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
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Co-authorOrganisationJoint articles
Taufik Abd HakimUniversiti Teknologi MARA1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.ugm.ac.id/gamaijb/oai, first harvested 28 Okt 2026, last seen 1 Nov 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en-US">The Impact Of Thin Trading Adjustments On Exchange Rate Exposure</dc:title>
	<dc:creator>Lily, Jaratin</dc:creator>
	<dc:creator>Bujang, Imbarine</dc:creator>
	<dc:creator>Karia, Abdul Aziz</dc:creator>
	<dc:subject xml:lang="en-US">exchange rate exposure; thinness market; beta adjustment; ARDL; Asian countries</dc:subject>
	<dc:subject xml:lang="en-US">Exchange Rate Exposure; Thinness Market; Beta Adjustment; ARDL; Asian countries</dc:subject>
	<dc:subject xml:lang="en-US">C58, F31, G10, G14, G15</dc:subject>
	<dc:description xml:lang="en-US">This study investigates the multiple exchange rate exposure of large non-financial firms in Asia and emerging countries using the unadjusted and adjusted two-factor exchange rate exposure model. The autoregressive-distributed lag (ARDL) method was applied to investigate the existence of exchange rate exposure. The Dimson-Fowler-Rorke (DFR) adjustment method was applied to adjust the ordinary least squares (OLS) market risk estimator for the thin trading phenomenon. The study’s findings indicate that exchange rate exposure does affect firm value. Incorporating the DFR market beta in the exchange rate exposure model indicates two important findings. Firstly, there is a significant increase in the number of firms exposed to exchange rate movements, especially in Indonesia, Thailand, Sri Lanka, and Vietnam. Secondly, there are more firms that will be exposed to multi bilateral exchange rate exposure across the sample countries. The findings imply that market characteristics such as thin trading could be an alternative explanation of the exchange rate exposure puzzle. Furthermore, future research should include asymmetric analysis as an alternative explanation for exchange rate exposure.</dc:description>
	<dc:publisher xml:lang="en-US">Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada</dc:publisher>
	<dc:contributor xml:lang="en-US">Ministry of Education Malaysia, Universiti Teknologi MARA</dc:contributor>
	<dc:date>2022-06-02</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
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	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.ugm.ac.id/gamaijb/article/view/36806</dc:identifier>
	<dc:identifier>10.22146/gamaijb.36806</dc:identifier>
	<dc:source xml:lang="en-US">Gadjah Mada International Journal of Business; Vol 24, No 2 (2022): May - August 2022; 127-150</dc:source>
	<dc:source>2338-7238</dc:source>
	<dc:source>1411-1128</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.ugm.ac.id/gamaijb/article/view/36806/33899</dc:relation>
	<dc:rights xml:lang="en-US">Copyright (c) 2022 Gadjah Mada International Journal of Business</dc:rights>
	<dc:rights xml:lang="en-US">http://creativecommons.org/licenses/by-sa/4.0</dc:rights>
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