The Impact of U.S. Trade Deficit Announcement on the Stock Prices of U.S. And Japanese Automakers
Posted: 15 Jul 1999
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: Suggested Citation