The Pricing of Exchange Rates in Japan: The Cases of the Japanese Automobile Industry Firms after the US Lehman Shock

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.