The evolution of stock market efficiency in the US: a non-Bayesian time-varying model approach

A non-Bayesian time-varying model is developed by introducing the concept of the degree of market efficiency that varies over time. This model may be seen as a reflection of the idea that continuous technological progress alters the trading environment over time. With new methodologies and a new measure of the degree of market efficiency, we examine whether the US stock market evolves over time. In particular, a time-varying autoregressive (TV-AR) model is employed. Our main findings are: (i) the US stock market has evolved over time and the degree of market efficiency has cyclical fluctuations with a considerably long periodicity, from 30 to 40 years; and (ii) the US stock market has been efficient with the exception of four times in our sample period: during the long recession of 1873–1879; the recession of 1902–1904; the New Deal era; and the recession of 1957–1958 and soon after it. It is then shown that our results are partly consistent with the view of behavioural finance.     

Cultural Commonality and Specificity in Japanese and Euro-Canadian Undergraduate Students' Leisure Experiences: An Exploratory Study on Control and Positive Affect

Accumulated cross-cultural research indicates that North Americans typically emphasize primary control (e.g., changing the environment) and high-arousal positive affect (e.g., enthusiasm), whereas East Asians typically emphasize secondary control (e.g., adjusting oneself, accepting the environment) and low-arousal positive affect (e.g., calmness). Therefore, the purpose of this exploratory experience sampling method study was to examine cultural similarities and differences in Japanese (n = 41) and Euro-Canadian (n = 15) undergraduate students' control and positive affect as leisure experience. Results indicated that during leisure versus non-leisure participation, (a) both Japanese and Euro-Canadians experienced primary control and high-arousal positive affect more and secondary control (acceptance) less, and (b) Japanese alone experienced secondary control (adjustment) and low-arousal positive affect more. This cross-cultural study contributes to the leisure studies field, both theoretically and practically, by identifying cultural commonality and specificity in leisure experiences as well as leisure's potential role in enhancing psychological well-being.     

International stock market efficiency: a non-Bayesian time-varying model approach

This article develops a non-Bayesian methodology to analyse the time-varying structure of international linkages and market efficiency in G7 countries. We consider a non-Bayesian time-varying vector autoregressive (TV-VAR) model, and apply it to estimate the joint degree of market efficiency in the sense of Fama (1970, 1991). Our empirical results provide a new perspective that the international linkages and market efficiency change over time and that their behaviours correspond well to historical events of the international financial system.     

Did mergers help Japanese mega-banks avoid failure? Analysis of the distance to default of banks

This paper applied the distance to default (DD) measure to five mergers among large Japanese banks during the crisis period. The DD helps us analyze whether mergers that took place in the late 1990s and 2000s made the merged banks financially more robust, as intended. Our findings include: (1) A merged bank fundamentally inherits financial soundness of premerged banks, without incremental value from the merger; and (2) A negative DD was observed following the merger. The findings of this case study are consistent with the view that large Japanese banks’ mergers either failed to implement intended scale economies or were motivated by a belief in the too-big-to-fail policy.     

Is There Private Information in the FX Market? The Tokyo Experiment

We provide evidence of private information in the foreign exchange market. The evidence comes from the introduction of trading in Tokyo over the lunch hour. Lunch-return variance doubles with the introduction of trading, which cannot be due to public information since the flow of public information did not change with the trading rules. We then exploit microstructure theory to discriminate between the two alternatives: private information and mispricing. Four key results support the predictions of private-information models. Three of these involve changes in the intraday volatility U-shape. The fourth is that opening trade causes mispricing's share in variance to fall.     

Offshore Outsourcing and Productivity: Evidence from Japanese Firm‐level Data Disaggregated by Tasks

This paper examines the relationship of offshoring with productivity, based on the original survey data of Japanese firms. Productivity gains were found in the firms offshoring both manufacturing and service tasks, but not in the firms offshoring only either manufacturing or service tasks. This paper also finds that firms offshoring to various destinations tend to be more productive than non‐offshoring firms. These results suggest that the level of firms' engagement in offshoring is more important for productivity than whether or not firms engage in offshoring.     

U.S. current account debate with Japan then,with China now

This paper examines two U.S. current account deficit episodes, one in the 1980s and the other in the current 2000s, in which Japan and China, respectively, are the current account surplus countries that are criticized for contributing to the deficits. In both periods, U.S. policy makers pointed out the underdeveloped and closed financial markets of the current account surplus countries and advocated for these countries to fix the deficiencies, a position akin to the current “saving glut” argument. In both episodes, the current account surplus countries have criticized the United States for its low saving, especially public saving (the “Twin Deficit” argument). This paper presents empirical findings that are consistent with the Twin Deficit hypothesis; A one percentage point increase in the budget balance raises the current account balance by 0.10–0.49 percentage point for industrialized countries. The saving glut argument seems to be applicable only for countries with highly developed legal systems and open financial markets. While the United States has been experiencing a savings drought in both episodes, the Japanese current account surplus was driven by underinvestment in the 1980s and by over-saving during the 2000s. Furthermore, although the current Chinese current account surplus is driven by its over-saving, there is no evidence of excess domestic saving in the Asian emerging market countries; rather, they seem to have suffered from depressed investment in the wake of the 1997 financial crises.