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.
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© 2015 Keiichi Kubota & Hitoshi Takehara
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Kubota, K., Takehara, H. (2015). Risk and Return on the Tokyo Stock Exchange. In: Reform and Price Discovery at the Tokyo Stock Exchange: From 1990 to 2012. Palgrave Pivot, New York. https://doi.org/10.1057/9781137540393_4
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DOI: https://doi.org/10.1057/9781137540393_4
Publisher Name: Palgrave Pivot, New York
Print ISBN: 978-1-349-50700-9
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