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Economic exposure over the next quarter

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A US based firm, Alamo Inc. attempts to determine its economic exposure to movements in the Singapore dollars (SGD), by applying regression analysis to data over the last 36 quarters: SP = b0 + b1e + u where SP represents the percentage change in company stock price per quarter, e represents the percentage change in the Singapore dollar value per quarter, and u is an error term. Based on the analysis, the b0 coefficient is zero and the b1 coefficient is -0.4 and standard deviation is 0.11. The company believes that the inflation differential has a major effect on the value of the SGD (based on purchasing power parity). The inflation in USA is expected to stay the same while the Singapore inflation will increase significantly. How would you expect the stock value of Alamo will be affected by its economic exposure over the next quarter?

Reference no: EM132540876

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