Short selling and stock prices with regime switching in the absence of market makers: The case of Japan

This paper investigates the relation between short selling and stock price at an aggregated market level. In order to study the differential impact of market microstructure on short selling, the data from Japanese stock markets are used. Both traditional regression and Markov switching models are used to compare Japanese results to those of U.S. and to admit non-stationary relation between short selling and stock price, respectively. Particularly, relatively long period (1978–2002) of analysis including bullish and bearish periods gives a good testable bed for studying the effect of short selling on stock price according to market condition. The empirical findings reveal that percentage change of short interests has a statistically significant positive relation with stock returns. It gives regulators policy implication that short selling is not a destabilizing activity, but an acceptable form of trading even in the absence of market makers. And short selling information cannot be used as an indicator for predicting future stock markets.     

中国证券市场的周期性异象检验

本文分析了6年多来中国证券市场大盘指数和基金指数的周内、月内及年内效应,并对其相互间的关联性进行了检验。实证表明,中国市场存在“周二周四”的周内效应;市场大盘指数2月份的收益率相对最高,基金指数在3月份、12月份的收益率较高,同时大盘指数和基金指数9月份的收益率都显著较低;各指数第三季度收益率相对最低;上半年收益率要高于下半年。联动性检验显示。周二、周四与月内的不同时段交互作用并不显著;周四与10月份对大部分市场大盘指数和基金指数有负的联动效应。     

Reputational Penalties in Japan: Evidence from Corporate Scandals

We examine incidents in which Japanese businesses are implicated in corporate scandals. Such firms suffer statistically significant losses in their market values. Given the negligible legal and regulatory penalties for Japanese companies, we interpret the results as convincing evidence on the magnitude of reputational losses. We also compare our results to those found in US studies. The average negative abnormal stock price reaction is larger in Japan than in the USA. Moreover, they are negative and statistically significant even when it is not obvious that the firm violated an implicit or explicit contract with the damaged party.     

Characteristics and performance of institutional and foreign investors in Japanese and Korean stock markets

This study examines the characteristics of the stock ownership by institutional and foreign investors, as well as their effects on stock price performance in Japan and Korea. The main results of this study are summarized as follows. First, foreign investors have a clearer preference for stocks with large capitalization and low book-to-market ratios than do institutional investors in both Japanese and Korean stock markets. Second, foreign investors prefer stocks with a high return on equity, especially in Korea. Third, average returns have more apparent differentiation among institutional (foreign) ownership portfolios than among foreign (institutional) ownership portfolios in Japan (Korea). Fourth, the stocks that are preferred simultaneously by both institutional and foreign investors show statistically significant positive abnormal returns in both Korea and Japan, whereas those preferred by either institutional or foreign investors show statistically significant positive abnormal returns only in Korea. The institutional investors' incentive for stock holding, the extent of stock market efficiency, and stock price polarization could be the possible explanations for the different empirical results observed for Japan and Korea. J. Japanese Int. Economies 21 (2) (2007) 195–213.     

Turnover tax and trading volume: Panel analysis of stocks traded in the Japanese and US markets

Japan eliminated turnover tax on stock trading through the end of the 1990’s to revitalize its ailing stock market by reducing the overall transaction cost for stock trading. This paper empirically examines the effect of this exogenous, institutional change in tax policy on stock trading volume in the Japanese market. To do so, we use panel data of stocks traded in both the Japanese and United States markets and compare changes in their trading volumes at the times of the tax changes. We use a well-established V-shape relationship between turnover and price change, with three different assumptions as regards how the price change relates to turnover across stocks and markets. Although a model allowing for both slope and intercept shifts does not offer any indications one way or the other, a more restricted model allowing only for an intercept shift clearly suggests a statistically significant increase in trading volume in the Japanese market but not in the United States markets for April 1999. However, such a result was not obtained for April 1996. These results indicate that the abolition of turnover tax in 1999, but not the rate reduction in 1996, contributed to the trading volume increase.     

Asian foreign exchange risk exposure

We find that about 25 percent of Asian firms experienced economically significant exposure effects to the US dollar and 22.5 percent to the Japanese yen for the period January 1993 to January 2003. The overall extent of exposure is not sample dependent; a depreciating (appreciating) Asian currency against foreign currencies has a net negative (positive) impact on stock returns. The extent to which firms are exposed to exchange rate fluctuations varies with return horizons; short-term exposure seems to be relatively well hedged, where considerable evidence of long-term exposure is found. Firms with weak liquidity positions tend to have smaller exposures. J. Japanese Int. Economies 21 (1) (2007) 16–37.     

股价崩盘风险、信息透明度与资本结构偏离度——基于沪深A股数据的实证分析

以中国A股上市公司为样本,文章考察了股票崩盘风险和信息透明度对资本结构偏离度的影响。研究表明:股价崩盘风险越大,资本结构偏离度越高;国有上市公司过度负债时,透明度越低资本结构偏离度越大;区分股权性质后的进一步研究表明,国有上市公司的资本结构受到股价崩盘风险和信息透明度的影响比非国有上市公司更加显著。上述研究说明在我国特殊的制度背景下,股价崩盘风险和信息透明度在资本结构的调整中起着重要的作用,稳定的资本市场和优越的信息环境有助于企业资本结构的优化。     

A long-run relationship between Eastern European stock markets? Cointegration and the 1997/98 crisis in emerging markets

A Long-Run Relationship between Eastern European Stock Markets? Cointegration and the 1997/98 Crisis in Emerging Markets. — This paper describes the behavior of the Eastern European stock price indices for the period between 1995 and 1998. Particular emphasis has been directed toward the effects of the 1997/98 emerging market crisis. Using the Johansen methodology, a long-run relationship connecting these markets can be found for the pre-crisis period. The common stochastic trend vanished following the third quarter of 1997, and a massive change in the short-run behavior of the markets is shown. Developments on the Russian exchange are found to have a dominating influence during that period.     

Intraday return and volatility spillover mechanism from Chinese to Japanese stock market

We analyze the mechanism of return and volatility spillover effects from the Chinese to the Japanese stock market. We construct a stock price index comprised of those companies that have substantial operations in China. This China-related index responds to changes in the Shanghai Composite Index more strongly than does the TOPIX (the market index of the Tokyo Stock Exchange). This result suggests that China has a large impact on Japanese stocks via China-related firms in Japan. Furthermore, we find evidence that this response has become stronger as the Chinese economy has gained importance in recent years.     

Influence of oil prices on stock market indexes in Russia and Norway

The effects of oil price dynamics on share quotations are discussed in the paper for the 2000–2012 period for two oil exporting countries—Russia and Norway. It has been shown, using a vector autoregressive model, that, in spite of intuitive expectations, oil prices have not been a systematic risk factor for Russian and Norwegian stock market indices. In Norway, share quotations definitely responded to the dynamics of the US dollar exchange rate relative to the world’s main currencies and the S&P 500 stock index, as well as to fluctuations in the global and domestic interest rates, although to a lesser degree. In Russia, share quotations are practically exclusively affected by their own shocks (a factor that is explained by some specific features characterizing Russia’s major public companies).     

Stock prices and the efficient market hypothesis: Evidence from a panel stationary test with structural breaks

This paper investigates whether the efficient market hypothesis holds in stock markets under different economic development levels over the period January 1999 to May 2007. We employ a state-of-the-art panel data stationarity test which incorporates multiple structural breaks. Evidence indicates that when accommodating general forms of cross-sectional dependence as well as controlling for finite-sample bias, the real stock price series appear to be stationary in 32 developed and 26 developing countries, respectively, which is in sharp contrast to the findings in the existing literature. Thus, real stock price indices are stationary processes that are inconsistent with the efficient market hypothesis. This shows the presence of profitable arbitrage opportunities among stock markets. According to these estimated structural breakpoints, we are also able to discover the reason for why there has been a huge impact from past stock prices.     

Seasonal Effect in Stock Market： Evidence from the Chinese Stock Exchange

In recent years, financial economists have provided much evidence of regularities in security market returns, and consequently the notion of market efficiency has been questioned. In this paper, seasonal effects are tested for the stock returns of Chinese A-share price index covering the period 1997-2005. The empirical research is conducted by using the conventional linear regression model. Finally the results obtained in this paper confirm the existence of the February effect and no evidence support for the day-of-the-week effects, and therefore these results provide some support of the informational efficiency aspect of the market efficiency.     

Stock market efficiency the evidence from FTA indices of eleven major stock markets

Summary This article presents a survey of recent literature on stock market efficiency, with special reference to the US and Dutch stock markets. Additionally, models are specified and estimated for the daily return since 1987 on FTA indices for eleven major stock markets, allowing for non-normality, heteroskedasticity, leverage effects and autocorrelation. The leverage effect and positive autocorrelation are characteristics of some of the indices investigated. The magnitude of the autocorrelation, however, is so small, that no profitable arbitrage opportunities arise and weak-form efficiency of these stock markets is not rejected.     

Measuring Exchange Market Pressure and Its Contagion in the East African Community

As the members of the East African Community seek to further integrate their economies, issues of compatibility arise. How interlinked are these countries' exchange markets, and which currencies are most likely to influence their neighbours? This study constructs monthly indices of exchange market pressure (EMP) for Burundi, Kenya, Rwanda, Tanzania and Uganda over the past decade. Two methods of constructing these indices are shown to exhibit large differences. Vector autoregressive approaches are then applied to the main EMP series and a set of global stock price proxies. Kenya, the dominant economy, is shown to have the largest effect on the region but is not itself affected by other regional currencies. Foreign stock price declines increase EMP for all countries except Tanzania, which is also the least integrated in terms of trade. This suggests that financial integration in the region is uneven – with implications for a successful common currency.     

货币政策、股票流动性与股票价格暴跌风险

目前中国股市还存在较多制度性缺陷,股价波动频繁且暴跌风险较高。本文以2003年至2013年中国A股上市公司为样本,检验作为激发机制的货币政策以及作为外部生成机制的股票流动性对中国股票价格暴跌风险的影响。研究发现：股票流动性与公司股票价格暴跌风险具有显著的敏感性,即随着股票流动性的下降,公司股票价格暴跌风险显著上升;货币政策越宽松,股票价格暴跌的风险越大;而且宽松的货币政策增强了股票流动性与股票价格暴跌风险的敏感性。区分市场势态的进一步分析表明,市场为熊市时,股票流动性对股票价格暴跌风险的影响更显著,货币政策的放松越容易激化股票价格暴跌风险,且对股票流动性与股票价格暴跌风险的敏感性的放大作用更为突出。     

Accounting Conservatism and Stock Price Crash Risk: Firm‐level Evidence

Using a large sample of U.S. firms during 1964–2007, we find that conditional conservatism is associated with a lower likelihood of a firm's future stock price crashes. This finding holds for multiple measures of conditional conservatism and crash risk and is robust to controlling for other known determinants of crash risk and firm‐fixed effects. Moreover, we find that the relation between conservatism and crash risk is more pronounced for firms with higher information asymmetry. Overall, our results are consistent with the notion that conditional conservatism limits managers’ incentive and ability to overstate performance and hide bad news from investors, which, in turn, reduces stock price crash risk.     

Firm-specific volatility of stock returns, the credibility of management forecasts, and media coverage: Evidence from Japanese firms

This paper explores the determinants of firm-specific informativeness of the stock price in terms of corporate disclosure quality and the quantity of public information by using Japanese data. In our empirical framework, we examine how the credibility of disclosure and media coverage are associated with the firm-specific volatility of stock returns. The results indicate that both greater accuracy of management forecasts and greater total media coverage contribute to the incorporation of firm-specific information in the stock price. Furthermore, for earnings-related news, the media reporting leads to less firm-specific volatility. Finally, an improvement in forecast accuracy enhances the marginal effect of media coverage of the earnings news toward reflecting firm-specific information.     

Are Japanese stock prices too high?

This paper studies the behavior of Japanese stock prices, especially that of the price earnings ratio (PER) and the price dividend ratio (PDR) in the 1980s. It finds that movements in fundamentals such as the interest rate and the growth rate together with the widespread practice of cross share holdings between corporations fail to explain the behavior of PER and PDR in the 1980s. The sharp increases in the Japanese PER and PDR in the 1980s are due to one of the following three causes: bubbles, declines in risk premium, and expectations of land price inflation. The paper argues that the latter two may have been important features of the Japanese economy in the 1980s.     

Effects of Japanese macroeconomic statistic announcements on the dollar/yen exchange rate: High-resolution picture

Using high-frequency transaction data of the actual trading platform, we examine market impact of Japanese macroeconomic statistics news within minutes of their announcements on the dollar/yen exchange rate. Macroeconomic statistics surprises that consistently have significant effect on dollar/yen returns include Tankan (business condition survey conducted by Bank of Japan), GDP, industrial production, price indices and balance of payment. The announcement itself, in addition to the magnitude of the surprise, is found to increase the number of deals and price volatility immediately after the announcement. Most effects, when significant, take place within 30 min of statistics announcements.     

East Asian equity markets,financial crises,and the Japanese currency

The paper studies the interactions between the US and four East Asian equity markets. The focus is on the change in the information structure/flow between these markets triggered by the 1997 Asian financial crisis. It is shown that the information structure during the crisis period is different from that in the non-crisis periods. While the US market leads the four East Asian markets before, during, and after the crisis, it is Granger-caused by these markets during the financial crisis period but not in the post-crisis sample. Further, in accordance with concerns reported in the market, the Japanese currency is found to affect these equity markets during the crisis period. The Japanese yen effect, however, disappears in the post-crisis sample. The Japanese currency effect is quite robust as it is found from both local currency and US dollar return data and in the presence of Japanese stock returns. J. Japanese Int. Economies 21 (1) (2007) 138–152.