Stock Index Autocorrelation and Cross-autocorrelations of Size-sorted Portfolios in the Japanese Market

Random walk hypothesis, Variance ratio tests, Japanese stock market

Household Portfolios in Japan: Interaction between Equity and Real Estate Holdings over the Life Cycle

I study the relationship between portfolio choice and age for the Japanese households by means of micro data and by paying particular attention to the interaction between decisions to hold stocks and real estate. The major findings are: First, equity shares in financial wealth (S/FW) increase with age among young households, peaking in the fifties age group, then becoming constant. This peak comes in a much later stage of the life cycle compared with Amerkis and Zeldes (2001) report about U.S. households. Second, we observe exactly the same age-related pattern for real estate shares in household total wealth (RE/TW). Third, with respect to both shares, S/FW and RE/TW, the age-related patterns are mostly explained by the decision to hold or not to hold stocks/real estate. Fourth, no age-related pattern in equity holding is observed for households that do not own real estate. These findings suggest that the age-related pattern observed in stock holding will be mostly explained by household's tenure choice of housing. Households who are to purchase and have just purchased houses cannot take risky positions in financial investment because they are saving for down payments or taking heavily leveraged positions by taking out housing loans. Therefore any serious attempt at modeling Japanese households' dynamic portfolio choice should incorporate the effect of housing tenure choice. In the second half of the paper, we draw some policy implications from these findings.

Stock Index Autocorrelation and Cross-autocorrelations of Size-sorted Portfolios in the Japanese Market

Following Lo and MacKinlay's work on the U.S. market (1988, 1990), this paper investigates the autocorrelation of the market index and the cross-autocorrelations of size-sorted portfolios in the Japanese market. The structure of the cross-autocorrelations in the Japanese market is very similar to that of the U.S. in the sense that there are lead-lag relations running from larger stocks to smaller stocks, which will create positive autocorrelation in the market index. Although we have found no autocorrelation in the popular Japanese TOPIX market index, it is because TOPIX puts much more weight on larger stocks compared to the CRSP index for the U.S. market. However, such a cross-autocorrelation structure disappeared during the latter half of the 1990s, as the largest stocks in the Japanese market began to exhibit negative autocorrelation. The possibility of a serious financial crisis during this period provides an explanation for negative autocorrelation. Some empirical evidence is provided for this explanation.

Economic Growth with Imperfect Protection of Intellectual Property Rights

The growth effects of intellectual property right (IPR) protection are examined in a quality-ladder model of endogenous growth. Stronger IPR protection, which reduces the probability of imitation, raises the reward for innovation. However, stronger protection reduces the number of competitive sectors, in which it is easier to innovate than in monopolistic sectors, thus concentrating researchers into fewer competitive sectors. As R&D projects take time until they are completed, concentration of R&D activity in a field raises the possibility of duplication of innovation, thereby hindering growth. In several settings, we show that imperfect, rather than perfect, protection maximizes growth.intellectual property rights, endogenous growth, quality ladder, imitation, leapfrogging, duplication.

Explaining Asset Bubbles in Japan

This paper examines the stock and land price behaviors during the bubble economy period (the second half of the 1980s), paying considerable attention to the linkage of the two markets and the effects of monetary policy. In particular, we examine whether the booms in these asset prices can be justified by changes of the fundamental economic variables such as the interest rates or the growth of the real economy. A complex chain of events is needed to explain the process of asset price inflation and deflation. Our empirical results suggest (i) that the initial increases of asset prices are sown by a sharp increase in bank lending to real estate; (ii) that a considerable comovement between stock and land prices is consistent with a theory that emphasizes the relationship between the collateral value of land and cash flow for constrained firms; (iii) that although the real economy was doing well and the interest rates were still low, asset price increases from mid-1987 to mid-1989 cannot be fully justified by the movement of fundamentals alone; and (iv) the stock price increase in the second half of 1989 and the land price increase in 1990 is not explained by any asset pricing model based on fundamentals or rational bubbles.

A Welfare Analysis of Global Patent Protection in a Model with Endogenous Innovation and Foreign Direct Investment

This paper constructs a North-South quality-ladder model in which foreign direct investment (FDI) is determined by the endogenous location choice of firms, and examines analytically how strengthening patent protection in the South affects welfare in the South. Strengthening patent protection increases the Southfs welfare by enhancing innovation and FDI, but it also allows the firms with patents to charge higher prices for their goods, which decreases welfare. However, the model shows that the former positive welfare effect outweighs the latter negative effect. Moreover, introducing the strictest form of patent protection in the South, that is, harmonizing patent protection in the South with that in the North, may maximize welfare in the South as well as in the North. Further, a similar result can also be obtained in a nonscale effect model.foreign direct investment, innovation, intellectual property rights protection, welfare analysis

Stock index autocorrelation and cross-autocorrelations of the size-sorted portfolios in the Japanese market

Following Lo and MacKinlay's works on the U.S. market (1988, 1990), this paper studies the autocorrelation of the market index and the cross-autocorrelations of the size-sorted portfolios in the Japanese market. The structure of the crossautocorrelations in the Japanese market is found to be very similar to that of the U.S. in the sense that there exists lead-lag relations running from larger stocks to smaller stocks and they will create positive autocorrelation in the market index. Although we find no autocorrelation in the popular Japanese market index such as TOPIX, it is because TOPIX puts much more weight on larger stocks compared with CRSP index for the U.S. market. However, recently such a structure of the Japanese market has become unstable and I argue the fact that it is the largest stocks which began to show negative autocorrelation since the second half of the 1990s that will explain it

Dynamic Analysis of Innovation and International Transfer of Technology through Licensing

This paper develops a quality-ladder type dynamic general equilibrium model with endogenous innovation and technology licensing as a major source of international technology transfer in developing countries. Examining the dynamic characteristics of the model fully, we explore the short- and long-run effects of both an improvement in the probability of reaching a licensing agreement with a given effort and an increase in the license fee rate. The model shows that the former promotes innovation and technology transfers in both the long and short run, while the latter discourages them.Innovation; Licensing; Technology transfer

Innovation, Licensing, and Imitation: The Effects of Intellectual Property Rights Protection and Industrial Policy

This paper examines the long-run effects of intellectual property rights (IPR) protection and industrial policies on innovation and technology transfer using a North-South quality ladder model where licensing is the main mode of technology transfer to developing countries. We show that the governments of developing countries can promote innovation and technology transfer by strengthening IPR protection, which is enforced by restricting the imitation of products. Moreover, the results also imply that subsidies on the cost of license negotiation can promote innovation and technology transfer, whereas subsidies on the cost of R&D have no effect.Licensing; Imitation; Innovation; Intellectual property rights;