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Japanese stock movements from 1991 to 2005: evidence from high- and low-frequency data

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  • Jun Nagayasu

Abstract

This article analyses movements in Japanese stock returns in the recent period (1991-2005). Unlike previous literature, by modelling persistence in both the mean and volatility simultaneously, first, we find evidence of persistence in Japanese stock returns. Second, while not so for daily returns, changes in monthly returns are found to reflect those in economic fundamentals, such as the interest rate and the dividend-price ratio. This finding is consistent with the conventional belief that higher frequency returns tend to move more in response to non-economic fundamentals, and we confirm that the poor long-term performance of Japanese stocks can be explained by economic factors. The statistical models are thoroughly examined by diagnostic tests in the contexts of the in- and out-of-sample forecasting.

Suggested Citation

  • Jun Nagayasu, 2008. "Japanese stock movements from 1991 to 2005: evidence from high- and low-frequency data," Applied Financial Economics, Taylor & Francis Journals, vol. 18(4), pages 295-307.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:4:p:295-307
    DOI: 10.1080/09603100600675490
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    1. Andrew C. Harvey, 1990. "The Econometric Analysis of Time Series, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026208189x, December.
    2. Jacob Boudoukh & Roni Michaely & Matthew Richardson & Michael R. Roberts, 2007. "On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing," Journal of Finance, American Finance Association, vol. 62(2), pages 877-915, April.
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    Cited by:

    1. Degiannakis, Stavros & Floros, Christos & Dent, Pamela, 2013. "Forecasting value-at-risk and expected shortfall using fractionally integrated models of conditional volatility: International evidence," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 21-33.

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