Empirical analysis of the effect of exchange rate volatility on share returns: Evidence from mining companies listed on the Johannesburg Stock Exchange, South Africa
Aug 2026· Investment Management & Financial Innovations· Vol 23, pp. 370–382-0· 0 citations· 48 references
Abstract
Type of the article: Research ArticleAbstractExchange rate volatility is a critical macroeconomic risk factor in emerging markets, particularly for export-oriented sectors such as mining in South Africa. The South African mining sector is inherently affected by exchange rate volatility, yet it is the economy’s largest foreign-currency earner through the export of mining resources. The study examines the effect of exchange rate volatility on mining companies’ share returns within South Africa. The study applies the system Generalized Method of Moments (GMM) estimator to account for both endogeneity and dynamic effects, using panel data from 15 Johannesburg Stock Exchange-listed mining companies over the period 2011 to 2024. The empirical results reveal that exchange rate volatility has a positive and significant effect on the share returns of mining companies, with a coefficient of 0.808, and on total returns (1.094). This indicates that higher currency risk is related to higher return premiums. In contrast, a negative and significant relationship exists between exchange rate volatility and share prices (99.45), implying an adverse valuation effect during heightened uncertainty. Regarding the control variables, GDP growth has a positive effect on share returns (8.978), while oil prices exhibit a negative relationship (–0.327). The results of the study support the risk-return trade-off and the flow-oriented exchange rate approach. The study therefore shows that exchange rate volatility plays a dual role through the enhancement of returns while depressing valuations. This highlights the benefits of implementing currency risk management strategies for investors and policymakers.
{'en': 'Exchange rate volatility is a central issue in international economics, with its impact on manufacturing exports directly affecting trade balances and industrial competitiveness across nations. Using panel data from 30 countries spanning 2005 to 2023, this study employs a two-way fixed effects model to systematically examine the effect of exchange rate volatility on manufacturing exports and its heterogeneity. The findings show that exchange rate volatility has a significant negative effect on manufacturing exports: a one-unit increase in exchange rate volatility reduces manufacturing export value by approximately 4.56%. This result remains robust after replacing core variables and trimming the sample. Heterogeneity analysis indicates that developing economies experience a slightly larger negative impact from exchange rate volatility than developed economies, though the difference is not statistically significant, reflecting that manufacturing exports in all countries struggle to fully avoid exchange rate risks within global production networks. This study provides new empirical evidence for understanding and addressing the trade effects of exchange rate volatility, and offers insights for policymakers to improve exchange rate risk management systems and optimize export structures.'}
Yuan Zhang· Future of Social Sciences· 0 citations
Purpose: The purpose of this study is to investigate the stock market risk determinants in South Asian economies. It analyzes the impact of exchange rate and interest rate fluctuations on Value at Risk (VaR). It also assesses how macroeconomic variables influence market volatility for investors and policymakers..
Design/Methodology: Annual panel data for five South Asian countries: Pakistan, Bangladesh, India, Nepal and Sri Lanka, for the years 2014-2024, have been analyzed. Parametric VaR was employed to measure the risk in the stock market, and fixed-effects panel regression was used to analyze the effect of selected macroeconomic variables.
Findings: The findings suggest that the impact of exchange rate and interest rate movements, GDP growth and oil prices are highly significant for the risk of the stock market, and also for the dynamics of the VaR. There is no significant direct effect of inflation, indicating that its effect may be indirect via other macroeconomic variables.
Practical implications: The study is useful to the policymakers for formulating stable monetary policies and to the investors for risk management in watching important macro-economic indicators which influence the volatility of the markets.
Originality: This study was a multi-country empirical evaluation of macroeconomic determinants of VaR in South Asia which was a parametric study. It emphasizes the interrelationships between the roles of domestic macroeconomic factors and external price shocks. The results add to the body of literature on financial-risk in the region.
Wajiha Sehar, A. Mubashir, Um-e Rubab et al.· NUST Business Review· 0 citations
{'en': "Amid heightened global economic uncertainty, exchange rate volatility has become a significant macroeconomic factor influencing firms' import and export activities. Using panel data from 30 countries spanning 2005–2023, this study employs a two-way fixed effects model to empirically examine the impact of exchange rate volatility on the resilience of corporate imports and exports. The findings indicate that: (1) exchange rate volatility exerts a significant negative effect on the resilience of corporate imports and exports, a result that remains robust after substituting the core explanatory variable and excluding crisis years; (2) GDP growth rate, trade openness, institutional quality, FDI inflows, and the share of industrial value added all significantly enhance import-export resilience, whereas inflation shows no significant effect; (3) heterogeneity analysis reveals that the negative impact of exchange rate volatility is similar in magnitude for both advanced and developing economies, but the explanatory power of exchange rate volatility is stronger in the model for developing economies. This study provides empirical evidence for understanding how exchange rate risk affects the stability of international trade and offers insights for exchange rate risk management and trade policy formulation."}
This study investigates the impact of real effective exchange rate (REER) volatility on foreign direct investment (FDI) inflows in three major Central and Eastern European (CEE) economies—Hungary, Poland, and Romania—using quarterly data spanning from 2007-Q1 to 2024-Q4. The exchange rate volatility is modeled using a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) framework, and country-specific relationships are estimated through Autoregressive Distributed Lag (ARDL) bounds testing and Toda–Yamamoto causality analysis. Our research indicates that a uniform relationship does not exist across the region. In Hungary, the utilization of directional FDI data excluding Special Purpose Entities (SPEs), in conjunction with structural breaks and quarterly seasonal controls, reveals a statistically significant nonlinear (inverted U-shaped) relationship between long-run exchange rate volatility and FDI inflows. In addition, domestic financial development exerts a substantial buffering effect on the transmission of volatility in Hungary by bypassing SPE flows that previously obscured this effect. In Poland and Romania, a stronger currency consistently discourages investment by reducing cost competitiveness. Romania shows a distinct pattern: volatility initially attracts FDI, and while deeper financial markets meaningfully dampen this effect, the net relationship remains positive, unlike Hungary, where sufficiently deep credit markets fully reverse it. These results suggest that policymakers should look beyond short-term exchange rate stabilization and instead prioritize structural reforms, competitive exchange rate levels, transparent FDI reporting standards, and deeper domestic financial markets to sustain FDI inflows.
Fatima Kobeissy, Sandor J. Kovacs, L. Nádasi· Economies· 0 citations
Stock price movements among basic materials sector issuers on the Indonesia Stock Exchange (IDX) are influenced by internal corporate financial conditions and macroeconomic shifts. This study examines the impact of Return on Equity (ROE), Current Ratio (CR), Earnings per Share (EPS), exchange rates, and economic growth on stock prices in this sector from 2021 to 2025. Utilizing a quantitative approach, secondary panel data were collected from official reports published by the IDX, Bank Indonesia, and the Central Bureau of Statistics (BPS). Purposive sampling selected 27 companies, yielding 128 observations analyzed via the Fixed Effects Model (FEM) in EViews 12. The empirical findings indicate that ROE does not significantly affect stock prices. Conversely, CR, EPS, and the exchange rate significantly and negatively influence stock prices, while economic growth exhibits a significant positive impact. Jointly, all independent variables simultaneously affect stock prices, with an R-squared (R2) value of 97.55%. These insights indicate that equity valuation in this industry is highly responsive to liquidity, per-share earnings, currency depreciation, and overall economic progress. Consequently, investors and executives must evaluate these metrics to optimize strategies.
Nigerian investors diversifying into international markets face a significant obstacle in the form
of foreign exchange risk, but there is a startling lack of empirical data on its effects. This study
closes this gap by carefully examining the impact of Naira volatility (NGN/USD, NGN/GBP, and
NGN/EUR) on the risk-adjusted performance of international portfolios. We use comparative
hedging simulations and multivariate regression using monthly data from 2010–2023, which
includes Nigeria’s 2016 capital liberalisation, several currency crises, and the 2023 Naira float.
Key findings show that oil price fluctuations and inflation discrepancies increase losses, and that
a 1% increase in forex volatility lowers real risk-adjusted returns (Sortino ratio) by 0.62% (*p*
< 0.001). Importantly, despite transaction costs, forward contracts through Nigeria's Investors' &
Exporters' window prove to be the best hedge, providing net returns during crises that are 10.8
percentage points higher than unhedged portfolios.
Isibor Areghan PhD· Journal of Accounting and Fi...· 0 citations