The Intertemporal Relation between the U.S. and Japanese Stock Markets

Kent G Becker, Joseph E Finnerty and Manoj Gupta

Journal of Finance, 1990, vol. 45, issue 4, 1297-1306

Abstract: This paper finds a high correlation between the open to close returns for U.S. stocks in the previous trading day and the Japanese equity market performance in the current period. In contrast, the Japanese market has only a small impact on the U.S. return in the current period. High correlations among open to close returns are a violation of the efficient market hypothesis; however, in trading simulation, the excess profits in Japan vanish when transactions costs and transfer taxes are included. Copyright 1990 by American Finance Association.

Date: 1990
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