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Land and Stock Prices in Japan

  • Douglas Stone
  • William T. Ziemba
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    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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    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. Craig S. Hakkio & Mark Rush, 1990. "Cointegration: how short is the long run?," Research Working Paper 90-08, Federal Reserve Bank of Kansas City.
    2. John Y. Campbell & Yasushi Hamao, 1989. "Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration," NBER Working Papers 3191, National Bureau of Economic Research, Inc.
    3. 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.
    4. 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.
    5. Louis A. Rose, 1990. "Land Values and Housing Rents in Urban Japan," Working Papers 199027, University of Hawaii at Manoa, Department of Economics.
    6. 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.
    7. French, K.R. & Poterba, J.M., 1990. "Are Japanese Stock Prices Too High?," Working papers 547, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Stiglitz, Joseph E, 1990. "Symposium on Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 13-18, Spring.
    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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