We examine the relationship between exchange-rate changes and stock
returns for a sample of Dutch firms over 1994-1998. We find that over
50% of the firms are significantly exposed to exchange-rate risk.
Furthermore, all firms with significant exchange-rate exposure benefit
from a depreciation of the Dutch guilder relative to a trade-weighted
currency index. This result confirms that firms in open economies,
such as the Netherlands, exhibit significant exchange-rate exposure.
We collect unique information on the most relevant individual
currencies for each firm with respect to their influence on firm
value. Our results indicate that the use of a trade-weighted currency
index and the use of individual exchange rates are complements. We
also measure the determinants of exchange-rate exposure. As expected,
we find that firm size and the foreign sales ratio are significantly
and positively related to exchange-rate exposure. In contras
