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Is the Equity Market Informationally Efficient in Japan? Evidence from Leveraged Bootstrap Analysis

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Abstract

This paper defines mathematically different forms for the efficient market hypothesis and tests this hypothesis for the equity market in Japan with respect to the interest rate, industrial production, money supply, consumer price index and the real effective exchange rate during the period 1978-2002. We apply the leveraged bootstrap causality test which is robust to non-normality and ARCH effects. A new information criterion is used to choose the optimal lag order in the VAR model. The causality test results provide empirical evidence that the equity market is informationally efficient with regard to each of these macroeconomic variables. These results are supported by the generalized variance decompositions. Our findings imply that the possibility for arbitrage profits in the equity market is ruled out.

Suggested Citation

  • Hatemi-J, Abdulnasser, 2004. "Is the Equity Market Informationally Efficient in Japan? Evidence from Leveraged Bootstrap Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 57(4), pages 461-473.
  • Handle: RePEc:ris:ecoint:0124
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    Cited by:

    1. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.

    More about this item

    Keywords

    The Efficient Market Hypothesis; Hacker-Hatemi-J Test; Optimal Lag Order; Japan.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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