The intra-day performance of market timing strategies and trading systems based on Japanese candlesticks

Abstract

We develop market timing strategies and trading systems to test the intra-day predictive power of Japanese candlesticks at the 5-minute interval on the 30 constituents of the DJIA index. Around a third of the candlestick rules outperform the buy-and-hold strategy at the conservative Bonferroni level. After adjusting for trading costs, however, just a few rules remain profitable. When we correct for data snooping by applying the SSPA test on double-or-out market timing strategies, no single candlestick rule beats the buy-and-hold strategy after transaction costs. We also design fully automated trading systems by combining the best-performing candlestick rules. No evidence of out-performance is found after transaction costs. Although Japanese candlesticks can somewhat predict intra-day returns on large US caps, we show that such predictive power is too limited for active portfolio management to outperform the buy-and-hold strategy when luck, risk, and trading costs are correctly measured.     

Reduction of estimation risk in optimal portfolio choice using redundant constraints

It is well known that when the moments of the distribution governing returns are estimated from sample data, the out-of-sample performance of the optimal solution of a mean–variance (MV) portfolio problem deteriorates as a consequence of the so-called “estimation risk”. In this document we provide a theoretical analysis of the effects caused by redundant constraints on the out-of-sample performance of optimal MV portfolios. In particular, we show that the out-of-sample performance of the plug-in estimator of the optimal MV portfolio can be improved by adding any set of redundant linear constraints. We also illustrate our findings when risky assets are equally correlated and identically distributed. In this specific case, we report an emerging trade-off between diversification and estimation risk and that the allocation of estimation risk across portfolios forming the optimal solution changes dramatically in terms of number of assets and correlations.     

Analysts' forecasts of Japanese firms' earnings: additional evidence

This article examines analysts' forecasts of Japanese firms' earnings during Japan's economic burst period in the 1990s. Using the evidence of analyst earnings forecasts in the United States as a benchmark, the article documents the following three findings. First, whereas the forecast accuracy of U.S. analysts following U.S. firms improves over time, the forecast accuracy of U.S. and Japanese analysts following Japanese firms does not. Second, whereas decreases in forecast errors of U.S. analysts following U.S. firms are best explained by decreases in forecast bias of the analysts, increases in forecast errors of U.S. and Japanese analysts following Japanese firms are best explained by increases in the frequency of losses experienced by Japanese firms. Third, Japanese analysts forecast earnings less accurately than do U.S. analysts. These findings reflect the difficulty of producing accurate earnings forecasts during economic downturns. They also suggest that Japanese analysts are more bound than their U.S. counterparts by cultural ties that impede forecast accuracy.     

Additional analyses of recent segment disclosures of Japanese firms

This paper discusses additional issues concerning segment reporting in Japan. Specifically, it discusses what the relevant segment reporting standards are, enforcement issues, the interaction of consolidation standards with segment disclosures, survey biases and response rates and the implications of segment disclosures in Japan for global investors and accounting standard setting bodies.     

Portfolio optimization under Expected Shortfall: contour maps of estimation error

The contour maps of the error of historical and parametric estimates of the global minimum risk for large random portfolios optimized under the Expected Shortfall (ES) risk measure are constructed. Similar maps for the VaR of the ES-optimized portfolio are also presented, along with results for the distribution of portfolio weights over the random samples and for the out-of-sample and in-sample estimates for ES. The contour maps allow one to quantitatively determine the sample size (the length of the time series) required by the optimization for a given number of different assets in the portfolio, at a given confidence level and a given level of relative estimation error. The necessary sample sizes invariably turn out to be unrealistically large for any reasonable choice of the number of assets and the confidence level. These results are obtained via analytical calculations based on methods borrowed from the statistical physics of random systems, supported by numerical simulations.     

Examination of U.S.-based Japanese subsidiaries: Evidence of the transfer of the Japanese strategic cost management

As a result of global competition, many Japanese companies are now operating in the United States. This article presents a survey of the management accounting methods employed by U.S.-based Japanese manufacturers and documents evidence about the current direction of accounting practices that are being transferred from Japan to the U.S. work environment. The results of the study show that most of the U.S.-based Japanese firms are similar to Japanese domestic firms in their use of management accounting methods of target costing and value engineering, variable costing, and strategic adaptation of traditional methods such as standard costing and budgeting. It is also evident that U.S.-based Japanese affiliates may be influenced by U.S. practices, as shown by significant usage of activity-based costing and internal rate of return for evaluating capital investment projects. This article is an important part of a continuing effort to study the development of management accounting among foreign-owned subsidiaries in the U.S., helping them to meet the challenges of global competition. Additionally, expanding this line of research on foreign subsidiaries that apply world class management accounting practices in other countries may assist U.S. multinational firms in their overseas subsidiaries' operations. Two limitations of this study and, thus, suggestions for future research are identified. First, the data on U.S.-based Japanese affiliates were collected for one point in time. Second, this study did not match each U.S.-based Japanese affiliate with its parent in Japan.     

论日语中英语外来语的语言特点

日语是一个拥有大量外来语词汇的语言。外来语的学习对于日语学习者来说是一大难点,也是必不可少的一部分。日语的外来语中英语外来语占很大比重,掌握英语外来语的语言特点有助于日语学习者更好地学习日语和了解日本语言文化。     

透视日语中人称代词省略的文化因子

日语中的人称代词省略现象非常普遍,这充分体现了日本人的语言习惯及日本文化的特点.与日语相比汉语中的人称代词使用率较高,如何正确使用人称代词是日语学习中的一个难点.本文从日语的语言结构出发,对日语中人称代词的省略现象进行分析,并与汉语进行对比,以便学习者能够准确的把握日语中人称代词的使用.     

The Structure of the Japanese Stock Market

The Japanese stock market is characterized by two prominent features. First, stock prices have been extremely volatile over the past ten years. Second, the market is dominated by cross-shareholdings and stagnant individual stock ownership. So, there are two purposes on this paper. The first is to assess the effects of stock cross-holdings on the stock market. The second is to look at recent stock price fluctuations, in the bubble period before 1990 and during the subsequent collapse. It will be recognized that these two features are interrelated.     

日元和马克的国际化比较及其启示

该文回顾并比较了日元和马克的国际化,马克在退出流通前的国际地位之所以明显超过日元,欧洲经济货币一体化和币值稳定是两个重要因素。为此,对人民币的国际化有两方面的启示：一是统筹协调资本项目可兑换与人民币国际化,区分市场类型,加快推进境外人民币资金投资国内金融市场;二是加强区域经济货币合作,推进人民币区域化,实现区域化与国际化的点面结合。     

The foundation of Confucianism in Chinese and Japanese accounting

The most important Chinese philosopher, Confucius, was primarily concerned with improving social welfare and ethical behaviour. He preached enlightened state leadership and conformity to traditions. Believing in equal opportunity education and public service, Confucius trained individuals to become government officials. He emphasized the importance of working with others harmoniously, contending that government should operate on the basis of propriety, morality, and rituals rather than laws and punishment.

This paper examines the main tenets of Confucianism and considers Chinese and Japanese accounting principles in light of Confucianism. The influence of Confucius on both Chinese and Japanese accounting is apparent.     

浅析人民币跨境结算与国际收支的相关性

随着我国开办跨境人民币结算业务以来,跨境结算人民币总量大幅增加,人民币国际地位得到提升。解析人民币跨境结算对国际收支的影响,有助于统一认识,制定相应的货币政策,有力推动人民币国际化进程稳步健康的发展。     

Are recent segment disclosures of Japanese firms useful?: Views of Japanese financial analysts

Since 1990, the Japanese Ministry of Finance (MOF) has required Japanese firms to disclose segment data in annual financial statements. Using a survey instrument, we examine whether Japanese analysts find these segment disclosures to be useful. Our study finds that analysts perceive that segment data aid them in forecasting consolidated sales and net income. However, results also show that analysts are concerned that Japanese firms do not define segments meaningfully and consistently and are arbitrary in the allocation of common costs. Further, the analysts do not believe that the usefulness of segment data improves when it is audited. These results have implications for investors in Japanese stocks and accounting policy bodies, such as the US Securities and Exchange Commission (SEC).     

Stochastic integrals driven by fractional Brownian motion and arbitrage: a tale of two integrals

Recent research suggests that fractional Brownian motion can be used to model the long-range dependence structure of the stock market. Fractional Brownian motion is not a semi-martingale and arbitrage opportunities do exist, however. Hu and Øksendal [Infin. Dimens. Anal., Quant. Probab. Relat. Top., 2003, 6, 1–32] and Elliott and van der Hoek [Math. Finan., 2003 Elliott, RJ and van de Hoek, J. 2003. A general fractional white noise theory applications to finance. Math. Finan., 13: 301–330. [Crossref], [Web of Science ®] , [Google Scholar], 13, 301–330] propose the use of the white noise calculus approach to circumvent this difficulty. Under such a setting, they argue that arbitrage does not exist in the fractional market. To unravel this discrepancy, we examine the definition of self-financing strategies used by these authors. By refining their definitions, a new notion of continuously rebalanced self-financing strategies, which is compatible with simple buy and hold strategies, is given. Under this definition, arbitrage opportunities do exist in fractional markets.     

日本大地震对经济金融的影响

3·11大地震使日本处于二战以来最为困难时期。地震及次生灾难使金融市场一度陷入恐慌,日本政府及时采取注资及G7联手干预等举措起到了稳定金融市场的作用。本文认为灾难的叠加效应将使日本经济复苏步伐受到影响,但全球经济总体不会受到明显影响。随着日本灾后恢复及重建工作的推进,巨额的救助资金无疑会对日本政府带来新的考验。     

The role of regulatory credibility in effective bank regulation

This paper develops a model of regulated Brownian motion with an endogenous profit term to analyze the role of regulatory credibility on the stability and productivity of the banking system. We show that when regulatory intervention is perfect and costless, the volatility of the system can be substantially reduced with no loss of productivity. In fact, perfect credibility can actually reduce the volatility of intrinsically risky banking systems below the volatility of intrinsically less risky systems as banks anticipate intervention and mitigate their investment behaviour accordingly. However, when the credibility of the regime is weakened because of increased uncertainty stemming from regulation, such as random costs or imperfect timing of regulatory intervention, both the stability and productivity of the financial system are impaired. Importantly, we find that in the presence of regulatory costs and imperfect credibility, there is no universal optimal intervention policy rule. The optimal regulatory system depends on the regulator’s level of absolute risk aversion.     

关于快速提升蒙古族大学生日语能力的思考

高校对日语的教学,必须顺应新时代潮流,不断改革和创新.尤其要根据少数民族人才培养要求和蒙古族大学生的特点组织教学,采取灌输式、启发式与体验式三位一体的教学形式,适当运用多媒体辅助教学,快速提升蒙古族大学生日语能力,以适应社会的需求.     

The effectiveness of interest-rate futures contracts for hedging Japanese bonds of different credit quality and duration

This study investigates the effectiveness of the Tokyo Stock Exchange (TSE)-traded Japanese 10-year JGB futures contract to hedge portfolios of Japanese bonds of differing maturity and credit quality. The bond portfolios examined are Government, AAA-, and AA-rated Eurobonds with maturities of 2, 3, 5, 7, 10, and 20 years. Consistent with the recent literature, the study employs univariate methods for calculating hedge ratios based on levels, first differences, and percentage change of each series. Out-of-sample forecasting is used to determine the effectiveness of the calculated hedge ratios for each of the bond portfolios and to determine which approach to calculating hedge ratios is the most effective. The results show that this particular futures contract does provide a good hedge, particularly for those bond terms closest to the 10-year term of the contract. There is some evidence, although not strong, that JGBs are better hedged than AAA and AA bonds. Investors should take some caution when using this futures contract to hedge bond portfolios of different maturities and credit ratings.