Do Japanese Stock Prices Reflect Macro Fundamentals?
AbstractThis paper investigates to what extent the fundamentals of the real economy are re ected in the stock prices of Japan. A Markov switching VAR model with switching variances is used to test the structural identi cation scheme. Identification of fundamental and nonfundamental shocks is shown to be supported by the data. Based on the appropriate structural restriction, the historical stock prices are decomposed into fundamental components and nonfundamental components. The decomposition shows that the linkage between Japanese stock prices and real activity shocks became strengthened since the bubble collapsed in the beginning of 1990s.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2012-037.
Length: 25 pages
Date of creation: May 2012
Date of revision:
Stock price; real activity; financial crisis; structural restrictions;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-CFN-2012-05-29 (Corporate Finance)
- NEP-FMK-2012-05-29 (Financial Markets)
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