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Abstract

Vol. 63, No. 4, pp. 365-376 (2012)

“Re-examination of Stock Return Predictability in Tokyo Market”
Tokuo Iwaisako (Institute of Economic Research, Hitotsubashi University)

Return predictability of market portfolio (stock market index) is re-examined for Japanese market using an updated data set including observations in 2000s. It is found that random walk hypothesis is clearly clearly rejected for the value-weighted index returns for the sample containing the observations from 2000s are included. It seems that apparent positive autocorrelation in the largest size portfolios observations in the 2000s subsample are responsible for this finding. In the second half of the paper, short-term interest rate variables are examined as a forecasting variable in addition to past stock returns. The importance of lagged returns the observations from 2000s are included.