This paper analyzed the association between exchange rate fluctuations and industry level stock price changes. While recent literature on the exchange rate has been concentrated on analyzing the relationship between market index and exchange rate, this paper decomposed the effect of exchange rate on the market level into industry level and corporate level. The approaches that we have taken for analysis is to categorize each industry into groups by the extent of export ratio, import ratio and also categorize each corporate into groups by the firm specific variables, such as size, export ratio. On the other side of the analysis, we decomposed index level portfolios into individual stock and analyzed which corporate drives the relationship between exchange rate and index price. The purpose of this paper is not just showing the significance level of the exchange rate variables, but to explain why exchange rate fluctuation is relevant on the specific industry.
