What drives stock returns in Japan?

Samuel Xin Liang ()
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Samuel Xin Liang: Tyndale University College and Seminary

Financial Markets and Portfolio Management, 2019, vol. 33, issue 1, No 2, 39-69

Abstract: Abstract We investigate systematic factors driving stock returns and stock return predictability in Japan. We find that dividend yield, cash-flow yield, and industrial production are systematic pricing factors after controlling for market, value, and size, while other macroeconomic factors are not. Value and size premiums become insignificant after adding the industrial production factor to market, value, and size factors because the value factor captures the changing fundamentals of Japan’s macroeconomic development. For predicting stock returns, our tests using Fama and MacBeth’s (J Political Econ 71:607–636, 1973) regressions accept the models of both factor and characteristics for a stock’s cash-flow yield, and a characteristics model for a stock’s short-term reversal, dividend yield, and earnings yield.

Keywords: Systematic risk factor; Industrial production; Dividend yield; Cash-flow yield; Return predictability (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11408-018-0322-7

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