Strategy switching in the Japanese stock market

This paper investigates the expectation formation process of Japanese stock market professionals. By utilizing a monthly forecast survey dataset on the TOPIX distributed by QUICK Corporation, we sort forecasters into buy-side and sell-side professionals. We empirically demonstrate that the buy-side and sell-side professionals use either fundamental or trend-following strategies throughout their expectation formation processes and that they switch between fundamental and trend-following strategies over time. We also discuss that strategy switching can be key in understanding the persistent deviation of the TOPIX from the fundamentals.     

Asymmetric loss and herding behaviour of exchange rate forecasters: evidence from South Africa

This study examines the asymmetry of the loss function for private forecasters in exchange rate forecasts of the South African rand. It tests rationality under the possibility of an asymmetric loss function. The results indicate less evidence of asymmetry for a horizon of 1 month but considerable evidence of asymmetry for a horizon of 3 months. However, the shapes of the distributions formed by estimated asymmetry parameters of sub-samples for each forecaster are symmetric, regardless of the forecast horizons, which implies that these forecasters do not herd or antiherd. In fact, the results of our empirical herding test show that forecasters neither herd nor antiherd, which is in sharp contrast to recent findings on antiherding for foreign exchange rates in emerging market economies. Our findings provide consistent evidence for a recent suggestion that antiherding might result in the rejection of rationality, even under asymmetric loss functions. Our findings also suggest that central bank transparency might be associated with herding behaviours.     

Assessing Mortality Risk from Heat Stress due to Global Warming

With gradually progressing climate change in the future, the frequency and scale of hot summers like those observed in various places around the world in recent years will undoubtedly increase, giving rise to strong concerns over increased risk of death due to heat stress. Based on this background, we have developed a method to assess future changes in mortality due to heat stress with the entire globe as the target, and performed trial calculations using this method. The purpose of this report is to draw people's attention to the possible severe consequences of climate change by presenting the severest estimates in the uncertainty range due to adaptation/acclimation expected in the future, so as to induce further analysis and discussion on policies and measures. For the trial calculations, future changes in temperature were derived from the results of simulation using an Atmosphere‐Ocean General Circulation Model with the highest spatial resolution in the world at the time of the study. Population densities were assumed not to alter in the future. Assuming that no adaptation or acclimation takes place, when the rates of change of excess mortality due to heat stress are examined by country, the results of our calculations show increases of approximately 100% to 1000%. It is confirmed that the burden of climate change impact is quite unequal among countries, at least from the viewpoint of heat stress mortality. When considered together with present population densities, significant increases in excess mortality density can be seen in China, India, and Europe. These regions are characterized by large losses due to climate change in absolute quantitative terms. The need to consider the adoption of adaptation measures is therefore most urgent in these regions.     

Specialization Pattern and Multistaged Growth: Korea and Taiwan Compared

The sustained rapid growth of Korea and Taiwan represent two alternative paths of successful development. The difference between these two paths is reflected in industrial concentration, macroeconomic management, and export mix. During the 1997 crisis, Korea absorbed severe shocks and then scored a quick recovery, while Taiwan proceeded at a more or less constant pace. Taiwan has followed a "usual progression" experienced by Netherlands or Switzerland before; Korea has struck out on a different path, under a more active government policy. Before the current, ongoing reform, the development policy of Korea dates back to President Park, and fits his style of personal management over the economy. It has its own rationale, but also entails greater financial risks. The different roles played by the small and medium enterprises in the two economies provide food for thought in development economics.     

Import Penetration and Domestic Process Innovation

This paper develops a model of R&D competition between domestic and foreign firms that explicitly incorporates the effect of the market structure. We focus on how differences in costs modify the effects of increases in the number of foreign firms on R&D investments of domestic firms. We show that an increase in the number of foreign firms may have a positive effect on a domestic firm's R&D investment and also show that two trade policies, tariffs or quotas, could have different effects on R&D investments of domestic firms. A welfare analysis shows that greater cost advantages increase social welfare.     

On Land Price Formation: Bubble Versus Option

This paper investigates the theory of land price formation, taking into consideration the fact that an "option" is implicitly attached to land. Using a theoretical model, it tries to explain the land price bubbles in Japan in the late 1980s as the result of investors' expectations of alternative uses of the land. The model is estimated and validated using data on the Tokyo metropolitan residential area. The modelling exercise also determines the extent to which the option contributes to the formation of land prices. It is shown that the separation of the land price from its fundamental value can be satisfactorily explained by the option property of land.
JEL Classification Numbers: C53, G12, R14.     

The Usefulness of Accrual Information in Non‐mandatory Environments: The Case of Japanese Local Government

This study investigates how accrual accounting is used in a system in which it co‐exists with cash accounting. It uses a survey methodology to explore the factors that influence the extent to which accrual information is useful for decision making, when used in a dual system. The results show that although accrual information was used less for budgeting, evaluation, asset management or debt management, officials found accrual information useful for performance management. Moreover, neither experience nor leadership significantly contributed to decision‐making effectiveness. The study also found that the central government was the most influential promoter of accrual accounting in Japan. Of particular interest is the link between performance measurement and accrual information.