Time scale dependencies of currency risk: A case study of healthcare firms in Malaysia

The aim of this study is to investigate the extent of multiscale currency risk using wavelet analysis for 9 healthcare firms listed in the Bursa Malaysia. The study is motivated from the dynamic nature of foreign exchange rate risk across different time horizons. The highlight on the Malaysian healthcare sector is attributable to its vigorous trading in healthcare goods and services around the globe. The study adopts Maximal Overlap Discrete Wavelet Transform (MODWT) approach to decompose a given data series into various time intervals from January 2019 to December 2022. The study indicates that exchange risk concentration is non-monotonic from low to high time scale. Specifically, firm’s profitability becomes more susceptible to changes in foreign currency as time horizon expands. Therefore, firm managers and investors should factor in the length of transactions in foreign exchange risk assessment for optimal hedging strategies given the noticeable time scale effect on currency risk.