Who Times the Foreign Exchange Market? : Corporate Speculation and CEO Characteristics

Using a panel data set of U.S. non-financial firms with geographically segmented firm-level information on currency exposures, exchange rates, and foreign currency derivatives, we document that managers adjust derivatives holdings in response to past foreign exchange returns. We interpret this evidence as foreign exchange market timing. We observe this behavior to be affected by the CEO compensation scheme and to be more frequent among managers with a shorter tenure. For each firm in our sample, we construct an empirical measure of speculative behavior to investigate the profile of the speculator. We document that firms speculate less when the CEO is older, female, and when her compensation scheme has stronger ties to stock price volatility.