The Impact of Disclosing Successive Adjustments to Foreign Exchange Rates on Stock Profitability

Author

Hammoud K. Alazmi
Ahmed Z. Metwaly
Maged M. Albaz

Abstract

The Aim of this research is to analyze the impact of exchange rate Adjustments on stock returns in Egypt, and the impact of these changes depends on the analytical theoretical study approach to achieve the research objectives by reviewing what was stated in previous studies related to the research variables. The research focused on Egypt’s modern experience in exchange rate policies. As the research was conducted during the period from (2019-2023), it appears that positive and negative changes in the exchange rates of the Egyptian pound to the US dollar have a significant impact on stock returns, whether in the short or long term. It was found that currency depreciation tends to have a stronger impact on stock returns than the effect of currency appreciation, as the research concluded that exchange rate changes are affected by external variables, which affects stock returns, and that disclosures about exchange rate changes are necessary to avoid being subject to deterioration in stock returns. Practical Implications The results provide important insights for investors, regulators, and policymakers. With the devaluation of the local currency negatively impacting stock returns, investors should consider implementing appropriate currency hedging strategies to reduce the risks of currency depreciation, and thus maintain the expected rate of return on investments denominated in Egyptian pounds.

Keywords: Foreign Exchange Rates – Stock Returns – Egyptian Stock Exchange

Download Full Article