Measuring the Intertemporal Elasticity of Substitution for Consumption: Some Evidence from Japan

The purpose of this paper is to present improved estimates of the intertemporal elasticity of substitution (IES) for Japan assuming a constant relative risk aversion (CRRA) utility function. The estimates of the IES we obtain range from 0.2 to 0.5 when we use quarterly consumption data and the Continuous Updating Estimator (CUE). We find that the IES is weakly identified when we employ the two-step GMM estimator, while the CUE can identify the IES. Moreover, we also find that using consumption data of different frequencies leads to quite different estimates of the IES.Intertemporal Elasticity of Substitution, Relative Risk Aversion, Generalized Method of Moments, Continuous Updating Estimator, Weak Identification

Measuring the Time-Varying Market Efficiency in the Prewar Japanese Stock Market

This study explores the time-varying structure of market efficiency of the prewar Japanese stock market based on Lo's (2004) adaptive market hypothesis (AMH). In particular, we measure the time-varying degree of market efficiency using new datasets of the stock price index estimated by Hirayama (2017a,b, 2018, 2019a, 2020). The empirical results show that (1) the degree of market efficiency in the prewar Japanese stock market varied with time and that its variations corresponded with major historical events, (2) Lo's (2004) the AMH is supported in the prewar Japanese stock market, (3) the differences in market efficiency between the old and new Tokyo Stock Exchange (TSE) shares and the equity performance index (EQPI) depends on the manner in which the price index is constructed, and (4) the price control policy beginning in the early 1930s suppressed price volatility and improved market efficiency.Comment: 22 pages, 6 figures, 4 table

Estimating the Time-Varying Structures of the Fama-French Multi-Factor Models

This study examines the time-varying structures of Fama-French multi-factor models (Fama and French (1993, 2015, 2016, 2018)) using Ito et al.'s (2022) generalized least squares-based time-varying multivariate model. Specifically, we employ 25 benchmark portfolios for the U.S., Japan, and Europe to estimate time-varying parameters in those models, with a focus on time stability. We find that model parameters change over time, with differences in time stability among the countries/regions.Comment: 60 pages, 9 figures, 1 tabl