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Land and Stock Prices in Japan

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  • Douglas Stone
  • William T. Ziemba
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    Abstract

    This paper discusses the rise of Japanese stock and land prices in the past four decades and their dramatic decline in the early 1990s. To what extent can fundamental factors explain both the price levels and the returns from land and stock in Japan? Are land prices driving stock prices, or the other way around, or are still other factors affecting both? How has government policy interacted with the price changes? In practice, it is very difficult to solve the problem of separating the explanation that a bubble occurred from the possibility that the underlying fundamental problem is misspecified. We believe that the bulk of the rise in Japanese asset prices from 1985-89 and the decline during 1990-92 was driven by interest rate and credit market conditions. However, in certain speculative land markets, there is some evidence in support of the bubble hypothesis.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.7.3.149
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 7 (1993)
    Issue (Month): 3 (Summer)
    Pages: 149-165

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    Handle: RePEc:aea:jecper:v:7:y:1993:i:3:p:149-65

    Note: DOI: 10.1257/jep.7.3.149
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    1. Kenneth R. French & James M. Poterba, 1990. "Were Japanese Stock Prices Too High?," NBER Working Papers 3290, National Bureau of Economic Research, Inc.
    2. Ando, Albert & Auerbach, Alan J., 1990. "The cost of capital in Japan: Recent evidence and further results," Journal of the Japanese and International Economies, Elsevier, vol. 4(4), pages 323-350, December.
    3. Louis A. Rose, 1990. "Land Values and Housing Rents in Urban Japan," Working Papers 199027, University of Hawaii at Manoa, Department of Economics.
    4. Stiglitz, Joseph E, 1990. "Symposium on Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 13-18, Spring.
    5. Craig S. Hakkio & Mark Rush, 1990. "Cointegration: how short is the long run?," Research Working Paper 90-08, Federal Reserve Bank of Kansas City.
    6. Akgiray, Vedat & Booth, G Geoffrey, 1988. "The Stable-Law Model of Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(1), pages 51-57, January.
    7. Dezhbakhsh, Hashem & Demirguc-Kunt, Asli, 1990. "On the Presence of Speculative Bubbles in Stock Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(01), pages 101-112, March.
    8. Hamao, Yasushi & Campbell, John, 1992. "Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration," Scholarly Articles 3207694, Harvard University Department of Economics.
    9. Joseph Gyourko & Donald B. Keim, 1992. "What Does the Stock Market Tell Us About Real Estate Returns?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(3), pages 457-485.
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    Cited by:
    1. Kanemoto, Yoshitsugu, 1997. "The housing question in Japan," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 613-641, November.
    2. Azeez, A.A. & Yonezawa, Yasuhiro, 2006. "Macroeconomic factors and the empirical content of the Arbitrage Pricing Theory in the Japanese stock market," Japan and the World Economy, Elsevier, vol. 18(4), pages 568-591, December.
    3. Kiyohiko G. Nishimura & Fukujyu Yamazaki & Takako Idee & Toshiaki Watanabe, 1999. "Distortionary Taxation, Excessive Price Sensitivity, and Japanese Land Prices," NBER Working Papers 7254, National Bureau of Economic Research, Inc.
    4. Chung, Heetaik & Lee, Bong-Soo, 1998. "Fundamental and nonfundamental components in stock prices of Pacific-Rim countries," Pacific-Basin Finance Journal, Elsevier, vol. 6(3-4), pages 321-346, August.
    5. Sami Alpanda, 2012. "Taxation, collateral use of land, and Japanese asset prices," Empirical Economics, Springer, vol. 43(2), pages 819-850, October.
    6. Bertrand CRETTEZ & Claire LOUPIAS & Philippe MICHEL, 1997. "Croissance et modes de propriété des terres," Annales d'Economie et de Statistique, ENSAE, issue 48, pages 119-146.
    7. M. Imtiaz Mazumder & Nazneen Ahmad, 2010. "Greed, financial innovation or laxity of regulation?: A close look into the 2007-2009 financial crisis and stock market volatility," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(2), pages 110-134, June.
    8. Gonzalo Edwards & Jaime Hurtubia & Gert Wagner, . "El Suelo Urbano y el Mercado de Activos," Documentos de Trabajo 177, Instituto de Economia. Pontificia Universidad Católica de Chile..
    9. Gonzalo Edwards & Jaime Hurtubia & Gert Wagner, 1995. "El Suelo Urbano y la Composición de la Riqueza," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 32(96), pages 151-164.
    10. Alpanda, Sami, 2007. "The Boom-Bust Cycle in Japanese Asset Prices," MPRA Paper 5895, University Library of Munich, Germany.
    11. Carl Bonham & Byron Gangnes, 1995. "Intervention Analysis with Cointegrated Time Series: The Case of the Hawaii Hotel Room Tax," Working Papers 199505, University of Hawaii at Manoa, Department of Economics.
    12. Roehner, Bertrand M., 1999. "Spatial analysis of real estate price bubbles: Paris, 1984-1993," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 73-88, January.

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