Dynamic Relations between Macroeconomic Variables and the Japanese Stock Market: An Application of a Vector Error Correction Model
AbstractBy employing the vector error correction model (VECM) in a system of seven equations, we find that the Japanese stock market is cointegrated with a group of six macroeconomic variables. The signs of the long-term elasticity coefficients of the macroeconomic variables on stock prices generally support the hypothesized equilibrium relations. Our findings are robust to different combinations of macroeconomic variables in six-dimension systems and two subperiods. Also, the VECM consistently outperforms the vector autoregressive model in forecasting ability.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 18 (1995)
Issue (Month): 2 (Summer)
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