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Predictable Stock Returns in the United States and Japan: A Study of Long‐Term Capital Market Integration
Author(s) -
CAMPBELL JOHN Y.,
HAMAO YASUSHI
Publication year - 1992
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1992.tb03978.x
Subject(s) - predictability , excess return , economics , equity (law) , treasury , stock (firearms) , dividend , financial economics , capital market , monetary economics , finance , mechanical engineering , history , paleontology , context (archaeology) , physics , archaeology , quantum mechanics , political science , law , biology , engineering
This paper uses the predictability of monthly excess returns on U.S. and Japanese equity portfolios over the U.S. Treasury bill rate to study the integration of long‐term capital markets in these two countries. During the period 1971–1990 similar variables, including the dividend‐price ratio and interest rate variables, help to forecast excess returns in each country. In addition, in the 1980's U.S. variables help to forecast excess Japanese stock returns. There is some evidence of common movement in expected excess returns across the two countries, which is suggestive of integration of long‐term capital markets.