arXiv 10 May 2023 · Finance — Statistical Finance
arXiv:2305.05998 · PDF · DOI · OpenAlex · Extracted main text
This paper is the first study to examine the time instability of the APT in the Japanese stock market. In particular, we measure how changes in each risk factor affect the stock risk premiums to investigate the validity of the APT over time, applying the rolling window method to Fama and MacBeth's (1973) two-step regression and Kamstra and Shi's (2023) generalized GRS test. We summarize our empirical results as follows: (1) the changes in monetary policy by major central banks greatly affect the validity of the APT in Japan, and (2) the time-varying estimates of the risk premiums for each factor are also unstable over time, and they are affected by the business cycle and economic crises. Therefore, we conclude that the validity of the APT as an appropriate model to explain the Japanese sector index is not stable over time.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Fama, E. F. and MacBeth, J. D (1973) Risk, Return, and Equilibrium: Empirical Tests | 1.000 | 14 | 5 | 100% |
| 2 | Hamao, Y (1988) An Empirical Examination of the Arbitrage Pricing Theory: Using Japanese Data | 1.000 | 9 | 4 | 100% |
| 3 | Kamstra, M, J. and Shi, R (2023) Testing and Ranking of Asset Pricing Models Using the GRS Statistic | 1.000 | 8 | 4 | 100% |
| 4 | Tsuji, C (2007) What Macro-Innovation Risks Really Are Priced in Japan ? | 1.000 | 7 | 4 | 100% |
| 5 | Chen, N., Roll, R., and Ross, S. A (1986) Economic Forces and the Stock Market | 1.000 | 6 | 3 | 100% |
| 6 | Azeez, A. A. and Yonezawa, Y (2006) Macroeconomic Factors and the Empirical Content of the Arbitrage Pricing Theory in the Japanese Stock Market | 1.000 | 5 | 4 | 100% |
| 7 | Ross, S. A (1976) The Arbitrage Theory of Capital Asset Pricing | 0.874 | 5 | 2 | 100% |
| 8 | Ito, M., Noda, A., and Wada, T (2016) The Evolution of Stock Market Efficiency in the US: A Non-Bayesian Time-Varying Model Approach self | 0.811 | 4 | 2 | 100% |
| 9 | Kaneko, T. and Lee, B (1995) Relative Importance of Economic Factors in the U.S. and Japanese Stock Markets | 0.811 | 4 | 2 | 100% |
| 10 | Thorbecke, W (2020) How the Coronavirus Crisis Affected Japanese Industries: Evidence from the Stock Market | 0.811 | 4 | 2 | 100% |
Showing the top 10 of 54 scored citations.