The Impact of U.S. Trade Deficit Announcement on the Stock Prices of U.S. And Japanese Automakers

Posted: 15 Jul 1999

See all articles by Qian Sun

Qian Sun

Fudan University

Wilson H.S. Tong

Hong Kong Polytechnic University - School of Accounting and Finance; Hong Kong University of Science & Technology (HKUST) - Department of Finance

Abstract

Existing literature on trade news effect on asset prices generally looks at exchange rates and stock market indices. This paper focuses on individual stocks--the U.S. and Japanese "Big Three" automobile stocks. This study makes several contributions. First, it examines Japanese automobile ADRs, not the stocks per se, to avoid the time-lag problem. Deficit news shocks, especially the positive shocks, is found to have a negative impact on the Japanese automobile ADRs. Second, the paper finds only weak evidence on McQueen and Roley's (1993) suggestion that news impact is different under different economic conditions. Last, trade news is shown to be a competetive shock to the automakers in the sense of Karolyi and Stulz (1996).

JEL Classification: G10

Suggested Citation

Sun, Qian and Tong, Wilson H.S., The Impact of U.S. Trade Deficit Announcement on the Stock Prices of U.S. And Japanese Automakers. Available at SSRN: https://ssrn.com/abstract=168588

Qian Sun (Contact Author)

Fudan University ( email )

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Wilson H.S. Tong

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

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Hong Kong

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

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Hong Kong
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