Application of the q-factor Model to the Japanese Share Market

Brooke Alexandra Maeda

International Journal of Economics and Finance, 2017, vol. 9, issue 6, 15-22

Abstract: This paper tests the performance of the q-factor model proposed by Hou et al. (2015) to the Japanese share market. It examines ten years of monthly data for shares listed on both the First section and Second section of the Tokyo Stock Exchange. The results suggest that the q-factor model does not adequately explain returns for shares listed on the Tokyo Stock Exchange. For comparison purposes the data sample is applied to the Fama French three-factor model. The results of this analysis suggest that the Fama French three-factor model is more appropriate for the Japanese share market, and it provides evidence of a strong value premium. The factor which correlates to the value factor in the q-factor model was not significant, providing stronger support against the q-factor model as an adequate asset pricing model for Japan.

Keywords: share returns; asset pricing (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:6:p:15-22

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