Abstract
This paper investigates the time-series dynamics of the sensitivities of stock returns as to three Japanese representative automobile industry firms to the changes of the yen/US dollars exchange rates. Further, we also empirically examine whether the yen/US dollars exchange rates are priced in the Japanese automobile industry firms. We are particularly interested in the period after the US Lehman Shock in this study. Our formal statistical tests firstly demonstrate that recently, the sensitivities of the Japanese automobile industry stocks to the yen/US dollars exchange rates clearly increased. Moreover, the results of our traditional regressions clearly indicate that as to the representative automobile industry firms in Japan, the yen/US dollars exchange rate changes are generally priced in the Japanese equity markets, and their degrees of pricing are highest in the period after the US Lehman Shock.
Highlights
The time-varying exchange rates are the crucial risks for investors in financial markets and the relationships between the dynamics of exchange rates and stock returns were often argued
Our second objective in this paper is to investigate whether the exchange rate sensitivities of stock returns of the Japanese automobile industry firms increased in the period after the US Lehman Shock
By using the historical sensitivities of stock returns of the Japanese automobile industry firms to the yen/US dollars exchange rates, we investigate whether the exchange rate sensitivities of these firms increased after the period of the US Lehman Shock
Summary
The time-varying exchange rates are the crucial risks for investors in financial markets and the relationships between the dynamics of exchange rates and stock returns were often argued. Our second objective in this paper is to investigate whether the exchange rate sensitivities of stock returns of the Japanese automobile industry firms increased in the period after the US Lehman Shock. These viewpoints are different from those in the preceding studies and these are interesting and valuable new characteristics of this research. We computed the sensitivities of three Japanese representative automobile industry’s companies’ stock returns to the changes of the yen/US dollars exchange rates
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