Search

The results of this study indicate that the CAP Model was applicable to the TSE for the five year period from Oct. 1964 to Sept. 1969. The study has shown that investors in the TSE were compensated for bearing systematic risk. While the risk estimate of any one particular security may contain considerable error, individual errors tend to cancel one another when a portfolio is formed on the basis of risk estimates. The study showed that distinguishably different portfolios could be formed by grouping issues which have been ranked according to their systematic risk and that these portfolios were reasonably stable over time. This implies that past measures of risk can be used in the estimation of future levels of risk. Furthermore, portfolios should be diversified to the extent that risks which have no compensating return are minimized. If the total return and the diversification of the portfolio are controlled, it is then possible to predict the long term return of the portfolio relative to the return of the market. it was also concluded that for comparable indices during this period, the Japanese investor earned higher total returns, but his U.S. counterpart earned more excess returns. Furthermore, the two markets had a relatively low correlation coefficient. This indicates that higher returns could be achieved for the same amount of risk if an investor diversified into both markets instead of only one or that lower risk could be taken for a given level of expected return by employing the same strategy. [ABSTRACT FROM AUTHOR]

The ability to identify which factors best capture systematic return covariation is central to applications of multifactor pricing models. This paper uses a common data set to evaluate the performance of various proposed factors in capturing return comovements. Factors associated with the market, size, past return, book-to-market, and dividend yield help explain return comovement on an out-of-sample basis (although they are not necessarily associated with large premiums in average returns). Except for the default premium and the term premium, macroeconomic factors perform poorly. We document regularities in the behavior of the more important factors, and confirm their influence in the Japanese and U.K. markets as well. [ABSTRACT FROM AUTHOR]

The article presents the results of an empirical test, analysis, and comparison of the rate of return investors might expect in U.S., German, French and Japanese equity markets. The author notes the importance of this research in capital market theory—especially as it relates to the general market and individual securities. This empirical test involves developing, estimating and analyzing approximations and measuring them against the International Asset pricing model. The author develops a model to measure the expectations of the four international markets and then tested considering ex-post transformations of the model.

The article looks at the presence of foreign multinational business enterprises in the U.S. A table is presented of the revenues generated in North America by Foreign-based multinational corporations in 1991. In contrast to the 1970s, American firms are no longer dominant in foreign direct investment. Investment into the United States has exploded, as the author notes that, by the end of the 1980s, foreign investment in the United States was almost equal to American investment abroad. Multinational corporations from Europe and Asia are providing challenging competition for American firms. The rate of returns based on market value for foreign direct investment in the U.S. is compared to that of the United States' direct investment abroad.

This article explores the fundamental factors that affect cross-country stock return correlations. Using transactions data from 1988 to 1992, we construct overnight and intraday returns for a portfolio of Japanese stocks using their NYSE-traded American Depository Receipts (ADRs) and a matched-sample portfolio of U.S. stocks. We find that U.S. macroeconomic announcements, shocks to the Yen/Dollar foreign exchange rate and Treasury bill returns, and industry effects have no measurable influence on U.S. and Japanese return correlations. However, large shocks to broad-based market indices (Nikkei Stock Average and Standard and Poor's 500 Stock Index) positively impact both the magnitude and persistence of the return correlations. [ABSTRACT FROM AUTHOR]

This paper uses the predictability of monthly excess returns on U.S. and Japanese equity portfolios over the U.S. Treasury bill rate to study the integration of long-term capital markets in these two countries. During the period 1971-1990 similar variables, including the dividend-price ratio and interest rate variables, help to forecast excess returns in each country. In addition, in the 1980's U.S. variables help to forecast excess Japanese stock returns. There is some evidence of common movement in expected excess returns across the two countries, which is suggestive of integration of long-term capital markets. [ABSTRACT FROM AUTHOR]

In many countries settlements take place a fixed number of business days after the transaction (U.S., Japan). In other countries settlements take place periodically on a fixed date when all transactions performed before this date are settled (U.K., France, Italy). In both cases settlement procedures should cause returns not to be identically distributed over all days. The effect is likely to be the largest on markets where all trades are settled only once a month. An empirical investigation of the largest of those markets, the Paris Bourse, demonstrates the importance of the settlement procedure on the distribution of daily returns. [ABSTRACT FROM AUTHOR]

The relationship between stock prices and real estate prices has been the subject of substantial debate in both the academic and practitioner literatures. Existing studies have focused on the time series of stock and real estate returns using data from a single country, such as the U.S. By necessity, these studies examine return and price changes over short intervals, creating a bias when property values are smoothed from year to year. Using data from 17 different countries over 14 years, this paper examines the relation between stock returns and changes in property values and rents. Consistent with other country-specific studies, we find that, with the exception of Japan, the contemporaneous relation between yearly real estate price changes and stock returns is not statistically significant. However, when the data are pooled across countries and when we look at longer measurement intervals, a significant relation between stock returns and both rents and value changes becomes apparent. Real estate prices are also found to be significantly influenced by GDP growth rates and provide a good long-term hedge against inflation but a poor year-to-year hedge. [ABSTRACT FROM AUTHOR]

In this paper, we analyze the gains from international diversification of investment portfolios from the Japanese as well as the U.S. perspectives. The major findings of this paper include: First, the 'potential' gains from international, as opposed to purely domestic, diversification are much greater for U.S. investors than for Japanese investors. For U.S. investors, the gains accrue not so much in terms of lower risk as in terms of higher return, and the opposite holds for Japanese investors. Second, using various 'ex ante' international investment strategies designed to control parameter uncertainty, U.S. investors can realize substantial gains from international diversification in out-of-sample periods. Japanese investors, however, can gain relatively little. Third, hedging exchange risk generally allows the U.S., but not Japanese, investors to benefit more from international diversification. For U.S. investors, the international bond diversification with exchange risk hedging offers a superior risk-return trade-off than the international stock diversification, with or without hedging. [ABSTRACT FROM AUTHOR]

This study investigates the day of the week effect in the Japanese stock returns. Low Tuesday and high Wednesday returns are observed. Most of the positive returns arise during the nontrading period. The Monday effect is also observed in the week whose previous week is closed by Friday trading. Low Tuesday returns appear to be related to low Monday returns in the U.S. The weekly pattern is more pronounced for the returns of smaller firms. A reverse size effect is observed during the trading period. [ABSTRACT FROM AUTHOR]

The article presents a comparative study of industrial Research & Development (R&D) in Japan and the U.S. Many observers are impressed by the efficiency of Japanese industrial R&D. On interpreting the regression coefficients as rates of return, results are consistent with the contention that applied R&D in Japan has yielded a higher return than in the U.S. This contention seems reasonable, given Japan's greater emphasis on commercial projects and its reliance on advanced technology from the West, which could be adapted and improved at relatively low cost. Findings provide for the first time data showing the great extent to which Japan has focused on process technology, which according to many experts has tended to be neglected in the U.S. Also, it is shown that Japanese firms seem to have been much faster and more efficient imitators than American firms. Almost certainly, these factors too have contributed to the effectiveness of applied R&D in Japan. Faced with the Japanese technological challenge, American firms might respond by putting more resources into process R&D, which would make it more difficult for Japanese firms and others to appropriate a large share of the benefits from American product innovations.

In Japan as in the United States, stocks that are more sensitive to changes in the monthly growth rate of labor income earn a higher return on average. Whereas the stock-index beta can only explain 2% of the cross-sectional variation in the average return on stock portfolios, the stock-index beta and the labor beta together explain 75% of the variation. We find that the labor beta drives out the size effect but not the book-to-market-price effect that is documented in the literature. [ABSTRACT FROM AUTHOR]

In this paper, we examine the nature of transmission of stock returns and volatility between the U.S. and Japanese stock markets using futures prices on the S&P 500 and Nikkei 225 stock indexes. We use stock index futures prices to mitigate the stale quote problem found in the spot index prices and to obtain more robust results. By employing a two-step GARCH approach, we find that there are unidirectional contemporaneous return and volatility spillovers from the U.S. to Japan. Furthermore, the U.S.'s influence on Japan in returns is approximately four times as large as the other way around. Finally, our results show no significant lagged spillover effects in both returns and volatility from the Osaka market to the Chicago market, while a significant lagged volatility spillover is observed from the U.S. to Japan. [ABSTRACT FROM AUTHOR]