Japanese Stock Market Research Articles

An extensive analysis on the Japanese markets via S. Taylor's model

Applying S. Taylor's approach (1986), we make an extensive analysis on the Japanese stock market, foreign exchange market and the Japanese Government Bond Futures market. The purpose of this paper is to empirically reveal the structure of the Japanese markets via Taylor's model rather than to propose a new model. For this reason, we include a variety of analyzed data particularly for the Japanese stock market and the foreign exchange market because the results can be used in a different manner. The paper consists of three parts. But each part can be read separately.

MEAN AND VOLATILITY SPILLOVERS ACROSS MAJOR NATIONAL STOCK MARKETS: FURTHER EMPIRICAL EVIDENCE

AbstractThis paper provides additional insight into the nature and degree of interdependence of stock markets of the United States, Japan, the United Kingdom, Canada, and Germany, and it reports the extent to which volatility in these markets influences expected returns. The analysis uses the multivariate GARCH‐M model. Although they are considered weak, statistically significant mean spillovers radiate from stock markets of the U.S. to the U.K., Canada, and Germany, and then from the stock markets of Japan to Germany. No relation is found between conditional market volatility and expected returns. Strong time‐varying conditional volatility exists in the return series of all markets. The own‐volatility spillovers in the U.K. and Canadian markets are insignificant, supporting the view that conditional volatility of returns in these markets is “imported” from abroad, specifically from the U.S. Significant volatility spillovers radiate from the U.S. stock market to all four stock markets, from the U.K. stock market to the Canadian stock market, and from the German stock market to the Japanese stock market. The results are robust and no changes occur in the correlation structure of returns over time.

Myopic management behavior with efficient, but imperfect, financial markets: A comparison of information asymmetries in the U.S. and Japan

In order to gain insights into possible cross-national differences in asymmetric information between managers and investors, we empirically assess differences in timing between the U.S. and the Japanese stock markets in impounding accounting information. Our findings indicating that the Japanese stock market incorporates information earlier than does the U.S. stock market are consistent with the hypothesis that Japanese investors, who tend to have close ties to the businesses they invest in, are better informed than their U.S. counterparts. We suggest, building on Stein's (1989) work on market signaling/jamming, that larger information asymmetries in the U.S. may be creating incentives for a short-run management style detrimental to long-term competitiveness.

Stock market reaction to EC economic and monetary integration

The risk/return characteristics of world stock markets are examined for the period 1973–1990 and three sub-periods. From the perspective of the US investor, EC stock markets individually and collectively yield higher average rates of return but with higher variability than the US stock market (except for the sub-period 1979–1984). However, investment in a well-diversified portfolio of EC stocks earned marginally higher average returns with less risk than investing in the Japanese stock market (except for the sub-period 1979–1984). The evidence suggests that a strong dollar and deeper recession in Europe may have contributed to the poor performance of EC stock markets between 1979 and 1984.

An empirical test of the CAPM on the stocks listed on the Tokyo stock exchange

The present paper is an empirical test of the Sharpe-Lintner-Mossin model of the CAPM based on a modified version of Gibbons' methodology. We use the rates of return of the data listed in the first section of the Tokyo Stock Exchange. The monthly data on the rates of return from January 1952 to December 1986 was divided into seven five year periods. At 5% significance level the null hypothesis is rejected for all 7 sub-periods in the Alpha sorted portfolios. In the Beta sorted portfolios, the null hypothesis is rejected for three sub-periods. It is concluded that the lack of diversification is the main reason for the invalidity of the CAPM in the Japanese stock market.

Dividend yields and stock returns: Evidence from the Tokyo Stock Exchange

This study examines the Tokyo Stock Exchange (TSE) and documents that it is characterized by a significant dividend yield effect similar to that found in U.S. markets. The study also confirms the existence of a significant size and seasonal anomaly in the TSE as documented in prior literature. The dividend yield effect is found to be significant in January, March, June, and December but not in the other months. The significance of the dividend yield effect is found to hold even after controlling for the size effect. The tax rationale as an explanation for the dividend yield effect does not appear to be valid for the Japanese stock market. The fact that these anomalies behave in a fashion similar to that observed in the United States is suggestive of either an integrated global capital market or the omission of common elements in the pricing process used or both.

Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market

ABSTRACTWe study the joint effect of the trading mechanism and the time at which transactions take place on the behavior of stock returns using data from Japan. The Tokyo Stock Exchange employs a periodic clearing procedure twice a day, at the opening of both the morning and the afternoon sessions. This enables us to discern the effect of the clearing mechanism from the effect of the overnight trading halt. While the periodic clearing at the beginning of the trading day is noisy and inefficient, the midday clearing transaction appears to be no worse than the two closing transactions.

Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market

Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market

The growth in the Japanese stock market, 1949–90 and prospects for the future

This paper surveys the growth in size and value of the Japanese stock market from its post-Second World War reopening until the end of 1990. The rise has been spectacular, but there have been many declines along the way. These are discussed along with the close relationship between land and stock prices. The paper concludes with an assessment of the current situation and prospects for the short and long term.

Black Monday in New York, Blue Tuesday in Tokyo: The October 1987 Crash in Japan

This article summarizes the events around the October 19, 1987, Japanese stock market decline. Although Tokyo suffered a it did not experience the same panic as New York, primarily because Tokyo had a more consistent institutional and regulatory structure and could rely on more patient investors. Tokyo can, with certain limitations, be taken as an example of how the Report proposals would work in practice. Since Tokyo suffered a crash, if the Brady proposals are designed to prevent a crash, the Japanese experience proves that this cannot be done. On the other hand, if the Brady proposals are not meant to prevent a crash, but rather to help a quick return to an orderly market, Tokyo can serve as evidence that the Brady proposals are a step in the right direction.

The Intertemporal Relation Between the U.S. and Japanese Stock Markets

ABSTRACTThis paper finds a high correlation between the open to close returns for U.S. stocks in the previous trading day and the Japanese equity market performance in the current period. In contrast, the Japanese market has only a small impact on the U.S. return in the current period. High correlations among open to close returns are a violation of the efficient market hypothesis; however, in trading simulations, the excess profits in Japan vanish when transactions costs and transfer taxes are included.

Speculative Prices and Popular Models

The key idea of rational expectations models is to assume that people know (or behave as if they know) the true model that describes the economy. However, popular economic models (the models that are used by the broad masses of economic actors to form their expectations) are obviously not the same as those held by economists. This paper reports on data collection effort on popular models, using questionnaire survey methods, with the purpose of understanding speculative markets. I will report here on my research to understand the U.S. stock market crash of October 1987; research Fumiko Konya, Yoshiro Tsutsui, and I undertook to understand the Japanese stock market crash of October 1987; research Karl Case and I undertook to understand recent real estate booms; and research John Pound and I undertook to understand the periodic “hot” markets for initial public offerings (IPO's) of common stock.

The Japanese Stock Market: Pricing Systems and Accounting Information.

The Japanese Stock Market: Pricing Systems and Accounting Information.

Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets

Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets

A multi-index risk model of the Japanese stock market

While a great deal of empirical work has been performed on identifying the risk structure (return generating process) for the New York Stock Exchange, little work has been done in identifying and understanding risk in the Japanese stock market. In this paper, we use new statistical techniques to identify the risk structure of Japanese stocks. The risk structure we find is more complex than that in American markets and more clearly calls for the identification of more than one risk index. The identified risk structure is tested in a forecast mode and found to be relatively stable over time. The association between the risk structure and macro-economic variables is investigated.

Stock market rationality and price volatility: Tests using Japanese data

This paper tests the stock market rationality hypothesis, which implies that a stock price is determined as the discounted sum of optimally forecasted future dividends. Mankiw-Romer-Shapiro volatility tests and new volatility tests which do not use the unobservable “ex post rational price” are applied to the data from a stock market in Japan. A Hausman type specification test of the market rationality hypothesis is also developed and applied to the data. The results suggest that we cannot reject the hypothesis that the Japanese stock market is rational. A couple of variance inequalities are violated by the data but the violation does not seem to be significant. J. Japan. Int. Econ., December 1987, 1(4), pp. 441–462. Massachusetts Institute of Technology, Cambridge, MA 02139.

Functions of the Japanese Stock Market

Although the Japanese economy has experienced a remarkable growth in the postwar period, it would not be an overstatement to say that there has been no definitive analysis done on the functions performed by the capital market, particularly the stock market, and thus we have no common understanding of it. One of the possible reasons for this state is that industrial funds have mainly been supplied through the financial market centering around banks, whereas the stock market has played only a minor role. As a result of this, even in the few analyses that have been carried out, certain special characteristics of the Japanese stock market (the so-called backwardness compared to that of the United States, for example) have been emphasized, and even the viability of its functioning has been questioned.

Seasonal and Size Anomalies in the Japanese Stock Market

Little attention has been paid by the academic community in the United States to the Japanese stock market and its structure. Japan has the second largest economy in the Western world, and the Tokyo Stock Exchange (TSE) is second only to the New York Stock Exchange (NYSE) in terms of aggregate market values and sales volume. Analysis of the Japanese stock market is useful given its relative importance, but, in addition, examination of the Japanese market may offer insights into controversies surrounding U.S. markets. This study focuses on two such current controversies: the January and size anomalies.

The Japanese market and the economic environment*

S ince the War, the Japanese economy has been able to maintain a high growth rate. Among the conditions for such a growth, we cannot ignore the important role of the financial market.' Although post-war Japanese financial intermediation relied mostly on the flow of funds through the banking sector, there has been little research that deals with the securities market.' Since the oil crisis, however, the Japanese financial structure has drastically changed because of large issues of government bonds, so that the function of the securities market has rapidly become more important than before. Therefore, it is important to survey the Japanese securities market with the hope that it will be a starting point for this kind of research. In this paper, we shall focus on the stock market and examine its function from the macroeconomic point of view. The objective of our analysis is to clarify whether or not the price mechanism works in the Japanese stock market. The answer to this question provides a foundation for what is to follow, which will include a test of the Capital Ass& Pricing Model and the measurement of the cost of capital. First, we will survey the character of the Japanese stock market. We will then investigate the effectiveness of the price mechanism from two aspects, i.e., from the standpoint of allocational efficiency and from that of informational efficiency. Finally, we will present some concluding remarks.

The big japanese stock market boom … and why

The big japanese stock market boom … and why