"Risks and Returns of Trades: A case of Mitsubishi Corporation in the Prewar Period " (in Japanese)

Tetsuji Okazaki
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Tetsuji Okazaki: Faculty of Economics, University of Tokyo

No CIRJE-J-282, CIRJE J-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper explores the modes of trading of a trading company and their implications on the risks and returns of trades, focusing on Mitsubishi Corporation in the 1920s. Mitsubishi employed two modes of trades, i.e. proprietary trading and consignment trading, and the former trades accounted for 43.8% of the total trades in 1928. From the original account book of Mitsubishi, I compiled a dataset containing the information of sales and margins at the individual transaction-level. It is revealed that there is substantial difference in the distributions of margin rates between proprietary trading and consignment trading. The distribution of margin rates of the proprietary trading has fat tails both on the left and right sides, and the average margin rate is significantly higher than that of consignment trades. As expected, proprietary trading yielded high risk and high return. The findings of this paper suggests further issues to be explored, including the choice of modes of trading by Mitsubishi and the mechanisms that Mitsubishi controlled the risk accompanying transactions by its own account.

Pages: 18 pages
Date: 2016-11
New Economics Papers: this item is included in nep-his and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:tky:jseres:2016cj282

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