Currency Moves and Company Performance

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Studies that surprisingly failed to show much impact on company stocks when currencies move collectively led to what’s known as the “exchange-rate exposure puzzle.” A recent study, availing itself of more detailed per-company data, suggests:

The puzzle endures. Companies apparently feel exchange rates less than one would surmise, confirming those earlier studies.

A far bigger impact on exports, sales, profits and stock returns was observed.

Read on: Researchers were able to build a metric that weights exchange rate changes based on each company’s specific mix of export destinations. This is important because one company might be exporting to a country where the dollar appreciated against the local currency while another company might be chiefly exporting to countries where the dollar weakened.

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What’s worse for today’s economy in India — being an area over which the British, ending in 1947, exerted direct control or an area where the British ruled indirectly through Indian officials?

Direct rule was worse, as expertise and connections — what we call human capital today — withered as Indian managers and laborers lost agency.

Indirect control was worse, as it was never quite clear who was in charge.

The results were uniform across areas under direct or indirect control.

Read on: Areas under direct British control in recent years have received less investment and citizens have attained less education.

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In China, giving citizens a say in local budgeting decisions:

Led to an uprising against the national regime.

Had no impact on citizens’ feelings about the national regime.

Caused those citizens to express both greater satisfaction in the national regime and to expect more from it.

Read on: This positive, yet not destabilizing, impact of introducing a bit of democracy in an otherwise undemocratic system complements other research that found Chinese factory workers encouraged to be more involved in their work system reported higher satisfaction, and overall productivity rose as well.

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The Pacific Palisades and Altadena fires were devastating for residents in those areas. A working paper that examines past major fires suggests:

The financial and health impacts remain very localized.

Exposure to the smoke, even outside the burn zone, increases residents’ financial problems, as reflected in increased borrowing, in the months after a major fire.

Read on: The observation is troubling. The fire that mostly destroyed Paradise, Calif., in 2018 spread heavy smoke but through a lightly populated area. Smoke from the Palisades and Altadena fires potentially reached millions of people

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The FDIC insurance limit per deposit account is $250,000, but a little-examined expansion, known as reciprocal deposits, allows your bank to hand off amounts over that limit to other banks, affording depositors protection of many multiples of the limit. Great for bank customers. The loser from this program appears to be:

A. The FDIC insurance fund.

B. So-called too-big-to-fail banks.

C. Medium-sized banks.

D. A and B.

E. B and C.

F. None of the above.

Read on: The FDIC fund is now on the hook for potentially more payouts. And too-big-to-fail banks have lost some of their competitive advantage over medium-sized banks, which are now attracting more deposits.