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Risk and Return on the Tokyo Stock Exchange

In: Reform and Price Discovery at the Tokyo Stock Exchange: From 1990 to 2012

Author

Listed:
  • Keiichi Kubota

    (Chuo University)

  • Hitoshi Takehara

    (Waseda University)

Abstract

In Chapter 4 we compare three kinds of asset-pricing models, as proposed by Fama and French, Carhart, and Pastor and Stambaugh. The results of the Fama and MacBeth regressions and the GMM test suggest that all candidate risk factors are associated with Tokyo Stock Exchange long-run stock returns. As to sub-periods we find the Fama and French model can well explain the cross-sectional variations of Japanese stocks, especially in the 1980s. However, after the arrowhead launch the HML factor was no longer significant, while Pastor and Stambaugh’s liquidity innovation factor became significant. The result suggests the possibility that the launch of the arrowhead trading system at the TSE in January 2010 drastically changed the asset pricing structure, liquidity, and information asymmetry of the stocks listed on the Tokyo Stock Exchange.

Suggested Citation

  • Keiichi Kubota & Hitoshi Takehara, 2015. "Risk and Return on the Tokyo Stock Exchange," Palgrave Macmillan Books, in: Reform and Price Discovery at the Tokyo Stock Exchange: From 1990 to 2012, chapter 4, pages 42-60, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-54039-3_4
    DOI: 10.1057/9781137540393_4
    as

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