Takato Hiraki

Is Foreign Exchange Risk Priced in the Japanese Stock Market

The exchange rate is an important variable that affects international competitiveness and performance of Japanese firms. We use an unconditional and a conditional multi-factor asset pricing model to examine whether exchange risk is recognized and priced in the Japanese stock market. The results indicate that the exchange risk is generally priced in Japan. More specifically, we provide evidence, in the unconditional model, that the exchange risk is priced in both weak and strong yen periods, when the bilateral yen/U.S. dollar exchange rate measure is used. The results are more mixed when the trade-weighted exchange rate is used. For the conditional model, the exchange risk is priced regardless of the exchange rate measure used. The combined evidence from the two models suggests an interesting observation about the role of the secular exchange rate trend in shaping the perception of exchange risk in the Japanese capital markets.

Corporate governance and firm value in Japan: Evidence from 1985 to 1998

In this paper, we examine how alternative corporate governance mechanisms work in Japan, using the panel data on the equity ownership and bank loans of manufacturing companies listed on the Tokyo Stock Exchange (TSE) first section over the 1985-1998 period. First, we find that the main bank borrowing is negatively related to firm value until the early 1990s, which is consistent with the view of the main bank extracting surplus from client firms. Second, we show that the cross shareholdings between the main bank and client firms are negatively related to firm value during the sample period. Third, our results on the inter-corporate shareholdings show that one-way shareholdings tend to be positively related to firm value, but cross shareholdings tend to be negatively related to firm value when their effects are statistically significant. Finally, we find that managerial ownership is monotonically and positively related to firm value. The result of a simple check suggests that the endogeneity of managerial ownership did not drive our finding at least for the second subperiod (1992-1998).

Predictable patterns after large stock price changes on the Tokyo Stock Exchange

This paper extends to Japanese stocks recent research on short-term stock price adjustment to new information. Using standard methodologies, we find that stock returns of firms included in the Nikkei 300 tend to be significantly positive after large price decreases. This is similar to the pattern observed for American stocks in other research. The pattern remains when returns are adjusted for market movements, and exists independently of the October 1987 market break. We find little evidence of significant patterns following large stock price increases. We also find little evidence that non-transaction prices explain the persistent, significant returns observed following large price decreases on the Tokyo Stock Exchange. We conjecture that broker/dealers and TSE member firms respond to large price decreases not by trading for their own profit, but rather by selectively supplying liquidity to their preferred retail customers. We conclude that ordinary investors probably cannot earn economic profits from these statistically significant patterns.

How Did Japanese Investments Influence International Art Prices

We test the luxury consumption hypothesis of Ait-Sahalia, Parker, and Yogo (2004), using a unique international art price, import/export flow, and stock market data set. We find that the demand for art by Japanese collectors is positively correlated with art prices and Japanese stock prices. This correlation is magnified during the “bubble period” of the Japanese economy (the mid-1980s to the early 1990s) and gains even further strength for works of art typically favored by Japanese collectors. Our results suggest that Japanese investors (or Japanese asset markets) indeed affect international art prices—especially during the bubble period and its aftermath.

Volume and individual security returns on the Tokyo Stock Exchange

Abstract This paper explores the evidence linking short-term returns for individual Tokyo Stock Exchange (TSE) stocks and lagged trading volume over the period from January 1981 to June 1998. The TSE differs substantially from North American stock markets. It has no market-makers; it is a single-price, two-way, transaction-based continuous auction market with price movement limits. We apply a simple contrarian trading strategy similar to that suggested by Lehmann [Lehmann, B.N., 1990. Fads, martingales, and market efficiency. Quarterly Journal of Economics 105, 1–28.] and Conrad et al. [Conrad, J., Hameed, A., Niden, C., 1994. Volume and autocovariances in short-horizon individual security returns. Journal of Finance 49, 1305–1329.] to study the relation between lagged trading volume and subsequent weekly returns for stocks in the first section of the TSE. This approach is designed to avoid potentially misleading results caused by positive serial correlation in market indices as was demonstrated by Lo and MacKinlay [Lo, A.W., MacKinlay, A.C., 1990. When are contrarian profits due to stock market overreaction? Review of Financial Studies 3, 175–205.]. Consistent with results for North American stock markets, we find evidence that TSE stocks with losses in week t −1 experience price reversals in week t . Furthermore, TSE loser stocks with high trading volume in week t −1 tend to have larger price reversals in the following week. Trading volume appears to be a useful predictor of subsequent stock returns. These results are broadly similar to the findings of Conrad et al. and are consistent with the models developed by Blume et al. [Blume, L., Easley, B., OHara, M., 1994. Market statistics and technical analysis: the role of volume. Journal of Finance 49, 153–181.] and Campbell et al. [Campbell, J.Y., Grossman, S.J., Wang, J., 1993. Trading volume and serial correlation in stock returns. Quarterly Journal of Economics 108, 905–939.]. We find that the lagged trading volume and subsequent stock return patterns in Japan are broadly similar to what researchers have observed in North American stock markets. This is notable because there are substantial differences between the institutional features and microstructure of Japanese and American stock markets.

The information content of end-of-the-day index futures returns: International evidence from the Osaka Nikkei 225 futures contract

Abstract Employing a generalized autoregressive conditional heteroskedastic (GARCH) time series model, this study investigates the relationship between end-of-the-day (EOD) Osaka Nikkei index futures returns and overnight spot returns for the period September 1988 through June 1991. A statistically significant positive relationship is found between the unexpected component of EOD futures returns and overnight spot returns. In addition, the unexpected component of EOD futures returns is positively related to trading period spot returns over the next two trading days. These results suggest that EOD futures returns reflect the information of informed traders which is partially revealed through trading. The recent elimination of EOD Osaka Nikkei futures trading has removed an important source of information dissemination.

Are preholiday returns in Tokyo really anomalous? If so, why?

Abstract This paper re-examines the pattern of stock returns surrounding Japanese holiday closures. The paper also discusses market microstructure features unique to the Tokyo Stock Exchange with holidays delineated into three distinct groups: “other” holidays, Golden Week holidays, and New Years. Golden Week covers the period April 29 through May 5 and includes three major Japanese holidays. We find that the Japanese holiday effect is a Golden Week phenomenon. For the bulk of holidays, there is nothing unusual about preholiday returns. However, an examination of preholiday intraday returns reveals that afternoon session returns are unusually large for both “other” holidays and Golden Week holidays. Thus, in Tokyo, anomalous preholiday returns are confined to the afternoon trading session. High afternoon session returns are reversed on the postholiday, but only for “other” holidays. Empirical evidence is presented supporting the existence of asymmetric informational inefficiencies surrounding Japanese holiday closures.

An Analysis of the Relative Performance of Japanese and Foreign Money Management

Method for in vivo introduction of a nucleic acid cassette into stem cells of intestinal epithelium. The nucleic acid cassette is introduced via vector solution. The vector solution can be delivered via the intestinal lumen in a variety of ways, including through an insertion device such as an endoscope, through catheters, through ligating and clamping the intestine after laparotomy or through slow release capsules. The vector solution once introduced into the intestinal epithelium is allowed to contact the stem cells for sufficient time for incorporation, usually between 1 and 48 hours. After sufficient incorporation, the insertion device and/or clamping and ligation procedure blockage are removed. Preferably, the procedure includes sufficient fluid to distend the intestine and provide additional access to the stem cells and the crypts. The procedure is useful in treating a variety of diseases including metabolic disorders, endocrine disorders, circulatory disorders, coagulation disorders, cancer, and gastrointestinal disease.

Dividend yields and stock returns: Evidence from the Tokyo Stock Exchange

This study examines the Tokyo Stock Exchange (TSE) and documents that it is characterized by a significant dividend yield effect similar to that found in U.S. markets. The study also confirms the existence of a significant size and seasonal anomaly in the TSE as documented in prior literature. The dividend yield effect is found to be significant in January, March, June, and December but not in the other months. The significance of the dividend yield effect is found to hold even after controlling for the size effect. The tax rationale as an explanation for the dividend yield effect does not appear to be valid for the Japanese stock market. The fact that these anomalies behave in a fashion similar to that observed in the United States is suggestive of either an integrated global capital market or the omission of common elements in the pricing process used or both.

The impact of index futures trading on day-of-the-week effects in Japan

Abstract This paper investigates the impact of index futures on daily return seasonality in Japan. The introduction of index futures is hypothesized to increase the flow of information into spot prices, which in turn causes a shift in daily return seasonality. The introduction of index futures coincides with a significant impact on the return structure in Japan, both in terms of the daily seasonals and the lag effects of past returns on current returns. Of particular interest, the Japanese Tuesday effect disappears after the introduction of index futures, and in the post futures period, Monday returns are found to be anomalous.