Reexamining the Robustness of the Market Value of Equity

We apply the methodology of Knez and Ready (KR) (1997) to data from the Japanese stock market and reexamine the robustness of the risk premium for the market value of equity (MVE). In particular, we compare two alternative explanations for the relation between stock returns and MVE: the one pointed out by Fama and French (FF) (1992) and the other proposed by Berk (1995). Consistent with results for the U.S. market, when we check FF's explanation for MVE, we find that the risk premium for MVE is not robust against extreme observations. Besides the evidence supporting KR's findings, we study the role of MVE proposed by Berk (1995), who points out that under controlled expected cash flows, MVE will be negatively correlated with expected returns. After showing that MVE negatively correlates with risk in the presence of expected cash flows, we test the robustness of the relation between returns and MVE. We find that the estimated risk premium for MVE is robust when realized cash flows (earnings plus depreciation) or book value of equity (BE) is used as a proxy for expected cash flows.     

Consumption,income, and wealth inequality in Canada

In this paper, we document some features of the distribution of income, consumption and wealth in Canada using survey data from many different sources. We find that wage and income inequality have increased substantially over the last 30 years, but that much of this rise was offset by the tax and transfer system. As a result, the rise in consumption inequality has been relatively mild. We also document that wealth inequality has remained fairly stable since 1999. Using both confidential data and publicly available data, we are able to gauge the extent to which the publicly available data conceals aspects of inequality that confidential data reveals.     

Earthquake risk and housing prices in Japan: Evidence before and after massive earthquakes

The hedonic pricing approach is used to examine whether homeowners and/or renters alter their subjective assessments of earthquake risks after massive earthquakes. Using nation-wide household panel data coupled with earthquake hazard information and records of observed earthquakes, we find that there are some modifications of individuals' assessments of earthquake risk in both cases. We have carefully taken into consideration the bias stemming from the use of objective risk variables as a proxy for individual risk assessments. Our results suggest that the price discount from locating within a quake-prone area is significantly larger soon after earthquake events than beforehand. We argue that the most likely interpretation for this result is that households tend to underestimate earthquake risk if there has not been a recent occurrence.     

Applying the caption evaluation method to studies of visitors’ evaluation of historical districts

A historical district is a comprehensive form of historical attractions, and has diverse features that visitors can gaze on. This study proposes the application of the caption evaluation method, participatory research involving photographing by subjects, to a study of visitors’ evaluation of a historical district as a tourism destination. Thirty Japanese undergraduates who majored in commerce and 27 Japanese adults with an interest in architecture and/or town planning photographed settings of their choice in a Japanese historical district and stated how they perceived the captured settings in an open-ended form. Their statements were subjected to analysis using a software package as well as manual analysis. The results indicate relationships between various elements in the district and the subjects’ feelings and desires. Particularly, favourable evaluations of old objects and unfavourable perceptions of modern objects were implied. The results also suggest the types of activities visitors may wish to participate in.     

Reorientation of the Time-series Analyses for Macroeconomics

In empirical studies of macroeconomic theories, close attention should be paid to the relationships between the deterministic trends of different variables, especially when economic relations are investigated in the context of economic growth. The paper explains in an expository manner what kind of research can be undertaken to examine the reality of macroeconomic theories in terms of deterministic trends. Japanese postwar quarterly data of money, price, income and Solow's residuals are analysed to study the reality of the neutrality hypothesis regarding money.
JEL Classification Numbers: C32, N10