20 Using regression analysis to measure exposure.

a How can a UK company use regression analysis to assess its economic exposure to fluctuations in the euro?

b In using regression analysis to assess the sensitivity of cash flows to exchange rate movements, what is the purpose of breaking the database into sub-periods?

c Assume the regression coefficient based on assessing economic exposure was much higher in the second sub-period than in the first subperiod.

What does this tell you about the firm’s degree of economic exposure over time? Why might such results occur?