Is Foreign Exchange Risk Priced in the Japanese Stock Market?

Choi, Jongmoo Jay; Hiraki, Takato; Takezawa, Nobuya

doi:10.2307/2331100

Cited by 93 publications

(78 citation statements)

References 42 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Whether it is favorable or unfavorable depends on the entire industrial structure within a country. Studies emphasizing on the impact of the exchange rate on stock price for Taiwan can be found in Wu (1997), Guo and Wu (1998) and Chiao, Hung, and Nwanna (2001); whereas Choi, Hiraki, and Takezawa (1998), He and Ng (1998), Doukas, Hall, and Lang (1999), Caporale, Pittis, and Spagnolo (2002), Elyasiani and Mansur (2005) and Homma, Tsutsui, and Benzion (2005) among others, studied the relationship between the exchange rate and stock price of Japan.…”

Section: Introductionmentioning

confidence: 99%

Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate

Yau

Nieh

2006

Journal of Asian Economics

View full text Add to dashboard Cite

Since the Asian Financial Crisis in 1997, the relationship between stock prices and exchange rates has received considerable amount of attention from the economists, international investors and policy makers. The work reported here employs various linear and non-linear, time-series methodologies to investigate the short-term and long-term interrelationships among the stock prices of Taiwan and Japan and the NTD/Yen exchange rate during the period of January 1991-July 2005. The findings from this study include: firstly, the stock prices of Taiwan and Japan impact each other for short durations; secondly, with regard to relationship between stock prices and exchange rates, the portfolio approach is supported for the short-term and the traditional approach is more plausible for the long-term in the Taiwanese financial market, whereas the portfolio approach is not suitable for the Japanese stock market; and thirdly, there appears to be no long-term relation between NTD/Yen exchange rate and the stock prices of Taiwan and Japan. #

show abstract

Section: Introductionmentioning

confidence: 99%

Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate

Yau

Nieh

2006

Journal of Asian Economics

View full text Add to dashboard Cite

show abstract

“…Dumas and Solnik (1995) present evidence that deviations from purchasing power parity are reflected in the equity premium according to the conditional international capital asset pricing model (ICAPM). Choi, Hiraki and Takezawa (1998) and Doukas, Hall and Lang (1999) provide supportive evidence on the significance of the exchange risk premium from the estimation of a multi-factor asset-pricing model using individual Japanese stock returns (rather than stock index data).…”

Section: Recent Literaturementioning

confidence: 78%

Non-Linearities, Regime Switching and the Relationship Between Asian Equity and Foreign Exchange Markets^*

Holmes

Maghrebi

2002

International Economic Journal

View full text Add to dashboard Cite

“…Choi, Hiraki, and Takezawa (1998) adopt the same approach as Dumas and Solnik (1995), but focus on Japan. They conclude that exchange risk is priced using a conditional model, with a monthly risk premium of 1 percent per unit of risk.…”

Section: Previous Literaturementioning

confidence: 99%

“…In order to test whether each factor contributes to the pricing of any asset i using the expected-return-beta formulation of the risk pricing equation, it is necessary to impose a diagonal factor covariance matrix upon the system (Cochrane, 2001). Orthogonalization was performed by using the residuals from separate OLS regressions of the change in the bond yield on the stock market, and then the change in the exchange rate on both the orthogonalized bond yield and the stock market (Choi, Hiraki and Takezawa, 1998). The mean value of the interest rate and exchange rate factors are then zero, conditional on the market.…”

mentioning

confidence: 99%

Currency Risk Premia in Global Stock Markets

Merritt

Roache²

2006

IMF Working Papers

View full text Add to dashboard Cite

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption. JEL Classification Numbers: F31, F37, G12, G15

show abstract

Is Foreign Exchange Risk Priced in the Japanese Stock Market?

Cited by 93 publications

References 42 publications

Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate

Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate

Non-Linearities, Regime Switching and the Relationship Between Asian Equity and Foreign Exchange Markets^*

Currency Risk Premia in Global Stock Markets

Contact Info

Product

Resources

About

Is Foreign Exchange Risk Priced in the Japanese Stock Market?

Cited by 93 publications

References 42 publications

Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate

Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate

Non-Linearities, Regime Switching and the Relationship Between Asian Equity and Foreign Exchange Markets*

Currency Risk Premia in Global Stock Markets

Contact Info

Product

Resources

About

Non-Linearities, Regime Switching and the Relationship Between Asian Equity and Foreign Exchange Markets^*