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What drives stock returns in Japan?

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  • Samuel Xin Liang

    (Tyndale University College and Seminary)

Abstract

We investigate systematic factors driving stock returns and stock return predictability in Japan. We find that dividend yield, cash-flow yield, and industrial production are systematic pricing factors after controlling for market, value, and size, while other macroeconomic factors are not. Value and size premiums become insignificant after adding the industrial production factor to market, value, and size factors because the value factor captures the changing fundamentals of Japan’s macroeconomic development. For predicting stock returns, our tests using Fama and MacBeth’s (J Political Econ 71:607–636, 1973) regressions accept the models of both factor and characteristics for a stock’s cash-flow yield, and a characteristics model for a stock’s short-term reversal, dividend yield, and earnings yield.

Suggested Citation

  • Samuel Xin Liang, 2019. "What drives stock returns in Japan?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 33(1), pages 39-69, March.
    • Handle: RePEc:kap:fmktpm:v:33:y:2019:i:1:d:10.1007_s11408-018-0322-7
    DOI: 10.1007/s11408-018-0322-7
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    Cited by:

    1. Samuel Xin Liang, 2019. "The Driving Forces of Stock Returns in Hong Kong," Accounting and Finance Research, Sciedu Press, vol. 8(4), pages 1-1, November.

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    More about this item

    Keywords

    Systematic risk factor; Industrial production; Dividend yield; Cash-flow yield; Return predictability;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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