2019-04-18T13:49:53Z

2019-04-18

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Stock exchange

masterThesis

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School of Economics, Business Administration and Legal Studies, MSc in Banking and Finance

This dissertation was written as part of the MSc in Finance and Banking at the International Hellenic University. The objective of the present thesis is to examine the sensitivity of stock returns to foreign exchange risk in an oil-exporting country. Specifically, the analysis had been performed using listed companies in Norway’s Stock Exchange from 2008 to 2018. As the time period of the research was the post period of the global financial crisis, I have examined whether the relationship between foreign exchange risk and stock returns both has changed after the above event. Norway’s economic structure is not skilled labor oriented, but is highly subject on natural resources. Thus, Norwegian`s economic growth is significantly affected by the movements in the demand and the pricing for these natural resources. The main idea behind this research is to correlate the foreign exchange fluctuations with the changes in stock prices. This is one of the most important and challenging fields in the financial economics. Specifically, this study focused on a European oil country which is not a member of the Eurozone. In order to control for other risk factors affecting stock returns the model used will be based upon the Fama and French five factor model. In the past Norway has been used as the setting for testing the relationship between oil price shocks and stock markets volatility. The most important of which is the “Oil price shocks and stock markets in the U.S. and 13 European countries” of Jungwook Park, Ronald A.Ratti (2008), which indicates that the Norway as an oil exporter shows a statistically significantly positive response of real stock returns to an oil price increase. Compare to the findings for U.S. and Norway, for the most of the oil importing European countries, there is no strong evidence of linear effects on the real stock returns because of the positive or negative oil price shocks. Considering that the volatility of foreign exchange is a major influencing factor of changes in the macro environment and the macro environment has proven to affect stock prices, I have chosen to examine directly the effect of foreign exchange changes on stock returns.

Artikis, Panagiotis

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