Date of Award

Winter 1998

Document Type


Degree Name

Doctor of Philosophy (PhD)


Business Administration-Finance

Committee Director

Mohammad Najand

Committee Member

Sylvia Hudgins

Committee Member

Vinod Agarwal


The first chapter examines the changes in various European currencies' exchange rates through the time period 1980 through 1997. Specifically, we are interested to determine if there is any affect to the volatility of these exchange rates and specific events related to the advancement of European Unification. In order to move to a single currency it is imperative that the separate currencies become less volatile to facilitate the move to a single currency. In this study, we examine whether this is the case and discuss which currencies appear to display this behavior. It is observed that of the 14 currencies examined all but Ireland and Italy's currencies see dramatic reductions in volatility.

The second chapter examines the effects of announcements concerning European Monetary Union on the exchange rate volatilities of several European currencies. It is expected that when good news is portrayed in regard to a single currency, this will be considered bad news, thus eliciting a negative reaction. The currencies examined are the German mark, the Portuguese escudo, the Italian lira, the Greek drachma, and the Spanish peseta. In terms of volatility, a reaction to good news should be a reduction in volatility, as bad news should cause an increase in volatility. In total there are 22 announcements examined from January 1990 through September 1997. The German mark is observed to experience greater increases in volatility than decreases as does the Italian lira. Portugal and Greece appear to react more strongly to positive news in that the decreases in volatility are on average greater than the increases.

In the third chapter, the reactions of volatility changes to the returns of American Depository Receipts of companies from European Union member nations are examined. It is examined whether announcements regarding European Monetary Union create a notable change in the volatility of returns of these instruments. If a single currency is viewed as good news for these companies, the volatility of the returns of these companies should decrease. If the advent of a single currency is bad news, the volatility of returns should increase. In total there are 10 announcements examined from January 1990 through September 1997. Of the 8 countries examined, Finland, France and the Netherlands display no notable reactions. Luxembourg witnesses the largest decreases in volatility around 6 of the ten dates examined.


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