Predicting Daily Stock Returns: A Lengthy Study of the Hong Kong and Tokyo Stock Exchanges
If stock markets are efficient then it should not be possible to predict stock returns, i.e., no explanatory variable in a stock market regression model should be statistically significant. In this study, we find results indicating that daily effects exist in stock market returns. These daily or calendar effects previously shown to exist by others clearly indicate the purpose of this study. Researchers often equate stock market efficiency with the non-predictability property of time series of stock returns. We explore whether this line of argument is satisfactory and aids in furthering our understanding of how markets operate. We focus on one definition of capital market efficiency and on the experience of these principles in analyzing the performance of Hong Kong and Tokyo stock exchanges. We observe that stock returns (which include closing prices and dividends) are predictable and there are explanations for short-term predictability. Hong Kong and Japan are the focus of this study because of the maturity of their financial markets and the availability of clean data on these markets from a reputable and available source.
Volume (Year): 7 (2008)
Issue (Month): 1 (April)
|Contact details of provider:|| Postal: |
Web page: http://www.ijbe.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. Andrew Coutts & Peter Hayes, 1999. "The weekend effect, the Stock Exchange Account and the Financial Times Industrial Ordinary Shares Index: 1987-1994," Applied Financial Economics, Taylor & Francis Journals, vol. 9(1), pages 67-71.
- Steeley, James M., 2001. "A note on information seasonality and the disappearance of the weekend effect in the UK stock market," Journal of Banking & Finance, Elsevier, vol. 25(10), pages 1941-1956, October.
- Poterba, James M. & Summers, Lawrence H., 1988.
"Mean reversion in stock prices : Evidence and Implications,"
Journal of Financial Economics,
Elsevier, vol. 22(1), pages 27-59, October.
- James M. Poterba & Lawrence H. Summers, 1987. "Mean Reversion in Stock Prices: Evidence and Implications," NBER Working Papers 2343, National Bureau of Economic Research, Inc.
- Clare, A D & Thomas, S H & Wickens, M R, 1994. "Is the Gilt-Equity Yield Ratio Useful for Predicting UK Stock Returns?," Economic Journal, Royal Economic Society, vol. 104(423), pages 303-15, March.
- Andrew W. Lo & A. Craig MacKinlay, 1987.
"Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test,"
NBER Working Papers
2168, National Bureau of Economic Research, Inc.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Cho, Young-Hyun & Linton, Oliver & Whang, Yoon-Jae, 2007.
"Are there Monday effects in stock returns: A stochastic dominance approach,"
Journal of Empirical Finance,
Elsevier, vol. 14(5), pages 736-755, December.
- Young-Hyun Cho & Oliver Linton & Yoon-Jae Whang, 2006. "Are there Monday effects in stock returns: a stochastic dominance approach," LSE Research Online Documents on Economics 24520, London School of Economics and Political Science, LSE Library.
- Yoon-Jae Whang & Young-Hyun Cho & Oliver Linton, 2006. "Are there Monday effects in Stock Returns: A Stochastic Dominance Approach," FMG Discussion Papers dp568, Financial Markets Group.
- Granger, Clive W. J., 1992. "Forecasting stock market prices: Lessons for forecasters," International Journal of Forecasting, Elsevier, vol. 8(1), pages 3-13, June.
- Giuseppe Alesii, 2006. "Fundamentals Efficiency of the Italian Stock Market: Some Long Run Evidence," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 5(3), pages 245-264, December.
- Shigeyuki Hamori & Akira Tokihisa, 2002. "Some International Evidence on the Seasonality of Stock Prices," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 1(1), pages 79-86, April.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- John Y. Campbell, 1985.
"Stock Returns and the Term Structure,"
NBER Working Papers
1626, National Bureau of Economic Research, Inc.
- Kim-Leng Goh & Kim-Lian Kok, 2006. "Beating the Random Walk: Intraday Seasonality and Volatility in a Developing Stock Market," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 5(1), pages 41-59, April.
- Allan Timmermann & M. Hashem Pesaran, 1999.
"A Recursive Modelling Approach to Predicting UK Stock Returns,"
FMG Discussion Papers
dp322, Financial Markets Group.
- Pesaran, M Hashem & Timmermann, Allan, 2000. "A Recursive Modelling Approach to Predicting UK Stock Returns," Economic Journal, Royal Economic Society, vol. 110(460), pages 159-91, January.
- Pesaran, M. H. & Timmermann, A., 1996. "A Recursive Modelling Approach to Predicting UK Stock Returns'," Cambridge Working Papers in Economics 9625, Faculty of Economics, University of Cambridge.
- Keiichi Kubota & Hitoshi Takehara, 2003. "Financial Sector Risk and the Stock Returns: Evidence from Tokyo Stock Exchange Firms," Asia-Pacific Financial Markets, Springer, vol. 10(1), pages 1-28.
When requesting a correction, please mention this item's handle: RePEc:ijb:journl:v:7:y:2008:i:1:p:37-51. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.