Impact of Yen on Japanese Stocks
Jul 13, 2011
This paper considers the changing value of the yen and its impact on the Japanese stock market during the last three decades, examining how this currency sensitivity has varied substantially across Japanese firms and during the observed period. In addition, we found the response to a rising or falling yen to be asymmetric. The dispersion of yen sensitivity is also seen to vary over time, which has implications for the passive-active investment debate under volatile exchange rate conditions. We also found that yen sensitivity can contribute substantially to stock volatility.