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Macro shocks and the Japanese stock market

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  • Ying Huang
  • Feng Guo

Abstract

The article investigates to what extent various underlying macro (oil, supply, demand and portfolio) shocks impact the fluctuations of Japanese stock prices by developing a multivariate structural vector autoregression (SVAR) model. The results from a Markov regime-switching (MS) specification of the underlying shocks reveal that these shock-generating processes are characterized by nonlinearity with varied turning points and fit well with the actual historical events. Demand shocks, as opposed to supply shocks, are found to render pronounced influence on the stock market dynamics, indicating Japan's anaemic economic growth in the past decades has limited the role of supply shocks. Meanwhile, we find the importance of oil price shocks in driving the stock market as Japan is well synchronized in the world energy market.

Suggested Citation

  • Ying Huang & Feng Guo, 2008. "Macro shocks and the Japanese stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 18(17), pages 1391-1400.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:17:p:1391-1400
    DOI: 10.1080/09603100701720393
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    Cited by:

    1. Abhay Abhyankar, Bing Xu, and Jiayue Wang, 2013. "Oil Price Shocks and the Stock Market: Evidence from Japan," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Syed, Sarfaraz Ali Shah, 2022. "Stock market in the age of COVID19: Mere acclimatization or Stockholm syndrome?," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    3. repec:hum:wpaper:sfb649dp2012-037 is not listed on IDEAS
    4. Guo, Feng & Huang, Ying Sophie, 2010. "Does "hot money" drive China's real estate and stock markets?," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 452-466, June.
    5. Hong Thai Le & Marta Disegna, 2018. "Responses of macroeconomy and stock markets to structural oil price shocks: New evidence from Asian oil refinery," BAFES Working Papers BAFES25, Department of Accounting, Finance & Economic, Bournemouth University.
    6. Dohyun CHUN & Hoon CHO & Doojin RYU, 2018. "Macroeconomic Structural Changes in a Leading Emerging Market: The Effects of the Asian Financial Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 22-42, December.
    7. Rangan GUPTA & Roula INGLESI-LOTZ, 2012. "Macro Shocks and Real US Stock Prices with Special Focus on the “Great Recession”," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(2).
    8. Chen, Wenjuan & Velinov, Anton, 2012. "Do Japanese stock prices reflect macro fundamentals?," SFB 649 Discussion Papers 2012-037, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    9. Le, Thai-Ha & Chang, Youngho, 2015. "Effects of oil price shocks on the stock market performance: Do nature of shocks and economies matter?," Energy Economics, Elsevier, vol. 51(C), pages 261-274.
    10. Halil Altintas & Kassouri Yacouba, 2018. "Asymmetric Responses of Stock Prices to Money Supply and Oil Prices Shocks in Turkey: New Evidence from a Nonlinear ARDL Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 45-53.
    11. Bing Xu, 2015. "Oil prices and UK industry-level stock returns," Applied Economics, Taylor & Francis Journals, vol. 47(25), pages 2608-2627, May.

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