Abstract
Examining daily data of the Nikkei Average from 23 October 1986 to 20 January 1998, I find that although the mean of the rate of change during the trading hours (RT) is negative, the mean during non-trading hours (RNT) is significantly positive. I also find that (1) RT has a stable relationship with Japanese economic fundamentals while RNT does not, (2) RNT reflects US economic fundamentals, though weakly, and (3) if the previous trading hours reflected bearish trading, then the bearish sentiment is not taken over to opening time, as opposed to when the previous trading hours reflect a more bullish attitude. A possible cause of the positive RNT is optimism of Japanese investors, especially that of securities companies.
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