To estimate foreign exchange (FX) cash flow exposure, one may choose between direct and indirect regression approaches, where the direct approach uses accounting-based cash flow data and the indirect approach uses equity returns as a cash flow proxy. The indirect approach typically includes one...

We compare the foreign exchange (FX) exposure estimates of four empirical models that differ only in the choice of control variable. We use a large sample of US equities (19 100) over a long time span (1980--2011). We find a much higher percentage of statistically significant FX exposure...