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Abstract:
We find evidence that is consistent with the hypothesis that daily mutual fund flows may be instruments for investor sentiment about the stock market. We use this finding to construct a new index of investor sentiment, and validate this index using data from both the United States and Japan. In both markets exposure to this factor is priced, and in the Japanese case, we document evidence of negative correlations between â¬SBullâ¬? and â¬SBearâ¬? domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to domestic and foreign equity funds, suggesting that there is a foreign vs. domestic sentiment factor in Japan that does not appear in the contemporaneous U.S. data. By contrast, U.S. mutual fund investors appear to regard domestic and foreign equity mutual funds as economic substitutes.

Abstract:
We find evidence that is consistent with the hypothesis that daily mutual fund flows may be instruments for investor sentiment about the stock market. We use this finding to construct a new index of investor sentiment, and validate this index using data from both the United States and Japan. In both markets exposure to this factor is priced, and in the Japanese case, we document evidence of negative correlations between â¬SBullâ¬? and â¬SBearâ¬? domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to domestic and foreign equity funds, suggesting that there is a foreign vs. domestic sentiment factor in Japan that does not appear in the contemporaneous U.S. data. By contrast, U.S.mutual fund investors appear to regard domestic and foreign equity mutual funds aseconomic substitutes.

Abstract:
We find evidence that is consistent with the hypothesis that daily mutual fund flows may be instruments for investor sentiment about the stock market. We use this finding to construct a new index of investor sentiment, and validate this index using data from both the United States and Japan. In both markets exposure to this factor is priced, and in the Japanese case, we document evidence of negative correlations between 'Bull' and 'Bear' domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to domestic and foreign equity funds, suggesting that there is a foreign vs. domestic sentiment factor in Japan that does not appear in the contemporaneous U.S. data. By contrast, U.S. mutual fund investors appear to regard domestic and foreign equity mutual funds as economic substitutes.

Abstract:
We find evidence that is consistent with the hypothesis that daily mutual fund flows may be instruments for investor sentiment about the stock market. We use this finding to construct a new index of investor sentiment, and validate this index using data from both the United States and Japan. In both markets exposure to this factor is priced, and in the Japanese case, we document evidence of negative correlations between "Bull" and "Bear" domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to foreign bull and equity funds. They appear to be independent of domestic bull and bear fund flows, suggesting that there is a foreign vs. domestic sentiment factor in Japan that does not appear in the contemporaneous U.S. data. By contrast, U.S. mutual fund investors appear to regard domestic and foreign equity mutual funds as economic complements.

Investor Sentiment, Mutual Fund Flows, Bull and Bear Funds, Factor Pricing Mod

Abstract:
Recent empirical evidence has suggested that the Japanese mutual fund industry has underperformed dramatically in the past two decades. Conjectured reasons for under performance range from tax-dilution effect to high fees, high turnover and poor asset management. In this paper, we show that this underperformance is largely due to tax-dilution effects and not necessarily due to poor management. Using a broad database of funds which includes investment trusts closed to new investment we show that once an instrument for the time-varying tax-dilution exposure is included in a factor model, there is little evidence of poor risk-adjusted performance. A style analysis of the industry demonstrates that managers appear to pursue tax-driven dynamic strategies.

Abstract:
This study examines dynamics among the art, Japanese land, Japanese and U.S. stock market prices during the sample period from 1976 to 1998. We find that the Japanese land prices caused both art and Japanese stock prices to co-move during the sample period. We interpret this finding as suggesting that the accelerated appreciation of land prices in Japan stimulated Japanese investor demands for both international arts and Japanese stocks, especially, in the late 1980s. We further show that the Japanese land index as well as own art index returns are dominant factors in generating fluctuations of returns in most art indexes. We also find that an influence of the Japanese land prices on art prices was preserved and even increased in the 1990s after the burst of bubbles. We interpret this as suggesting that in the 1990s the decreasing land prices in Japan urged some Japanese investors to sell their holdings of arts at a considerable bargain.

Abstract:
Foreign investment management firms have recently started to play a major role in the investment trust business in Japan. In terms of assets under management, their size and market share have almost doubled in thepast several years. In part, the relative success of foreign managed firms inattracting market share may be attributed to the fact that Japanese investment trusts have underperformed benchmarks in quite a dramaticfashion over the past two decades. This is at best indirect evidence that Japanese funds under perform their foreign counterparts. In a recent paper (Brown, Goetzmann, Hiraki, Otsuki and Shiraishi 2001) we show that theunder performance can be attributed almost entirely to the unique tax environment of Japanese investment trusts, which had the effect of heavily penalizing early withdrawals. The relaxation of these regulations coincided with a major inflow of new money into the investment trust business. We examine the relative performance of Japanese and foreign investment management firms before and after this change in tax regulations, and find that the poor relative performance of Japanese funds from April 2000 through December 2001 may in part be attributed to the huge inflow of new moneyinto this sector and the style shifts made necessary to accommodate this flow.

Abstract:
Foreign investment management firms have recently started to play a major role in the investment trust business in Japan. In terms of assets under management, their size and market share have almost doubled in the past several years. In part, the relative success of foreign managed firms in attracting market share may be attributed to the fact that Japanese investment trusts have underperformed benchmarks in quite a dramatic fashion over the past two decades. This is at best indirect evidence that Japanese funds underperform their foreign counterparts. In a recent paper (Brown, Goetzmann, Hiraki, Otsuki and Shiraishi 2001) we show that the underperformance can be attributed almost entirely to the unique tax environment of Japanese investment trusts, which had the effect of heavily penalizing early withdrawals. The relaxation of these regulations coincided with a major inflow of new money into the investment trust business. We examine the relative performance of Japanese and foreign investment management firms before and after this change in tax regulations, and find that the poor relative performance of Japanese funds from April 2000 through December 2001 may in part be attributed to the huge inflow of new money into this sector and the style shifts made necessary to accommodate this flow.

Abstract:
We examine how foreign and domestic portfolio investors similarly or dissimilarly invest in Japanese firms for the period of 1985-1998. We propose the agency as well as relational explanations of foreign and domestic institutional investor biases. These explanations can explain bias patterns of foreign investors as well as those of domestic institutional investors in Japan; the latter are uniquely different from domestic money managers in other countries. We find that foreign investors over-invest in familiar and prudent firms while domestic institutional investors over-invest in large firms but do under-invest in the prudent in financial ratios. In addition, foreign investors become more export-firm oriented while the opposite time varying pattern is found for domestic institutional investors. Our empirical tests reveal that biases of these two classes of institutional investors do not exactly get subsumed under a common institutional investor bias mainly because of the unique relational factor in Japan.

Foreign investors, Home bias, Institutional investors, Investor familiarity, The Japanese stock market

Abstract:
In this study, we investigate whether multiple main bank relationships reduce the so-called "hold-up costs" of bank financing (Rajan (1992)) by examining the panel data of Japanese companies listed on the Tokyo Stock Exchange, first and second sections during the period from 1991 to 1998. Our empirical results show that main bank borrowing is negatively related to the profitability of the firm, which suggests the significant presence of holdup costs. However, multiple main bank relationships reduce the holdup costs and lead to higher profitability. This mitigating effect of multiple main bank relationships is larger for firms with higher value of growth opportunities than firms with lower value of growth opportunities.

Holdup Costs, Multiple Bank Relationships, Main Bank, Japanese Firms

Abstract:
This paper examines a unique data set consisting of Japanese equity returns for the Friday, Monday, and Tuesday surrounding U.S. Monday holiday closures. The objective is to neutralize the impact of spillover effects from New York to Tokyo. Prior studies find that Japanese returns are negative on Tuesday and anomalous; this phenomenon is known as the Japanese-Tuesday effect. One explanation for the Japanese-Tuesday effect is that there exists a cause and effect relationship with Monday returns in New York. Historically, Monday returns in New York are negative, a phenomenon known as the U.S.-Monday effect. The empirical results show that U.S. Monday closures have a significant impact on Japanese return dynamics for surrounding trading days. The empirical evidence does not support the hypothesis that the U.S.-Monday and Japanese-Tuesday effects are related. Potential explanations for the occurrence and then disappearance of the Japanese-Tuesday effect rely on microstructure properties unique to Tokyo. More recently, spillover effects from New York to Tokyo have increased in intensity, and this is attributed to the introduction of the Nikkei 225 index on the SIMEX.

Spillover effects, Japanese-Tuesday effect, market efficiency

Abstract:
Recent evidence suggests that global equity markets are becoming more risky. We find that much of the apparent increase in international variance and covariance of returns can be attributed to systematic variations in global risk premia correlated across markets, rather than to any fundamental change in the risk attributes of these markets. This result has interest both for practitioners and for those interested in modeling global asset prices.

Abstract:
Recent evidence suggests that global equity markets are becoming more risky. We find that much of the apparent increase in international variance and covariance of returns can be attributed to systematic variations in global risk premia correlated across markets, rather than to any fundamental change in the risk attributes of these markets. This result has interest both for practitioners and for those interested in modeling global asset prices.

Risk premia, international asset pricing models, global capital markets, global investments

Abstract:
Recent empirical evidence has suggested that the Japanese mutual fund industry has under-performed dramatically over the past two decades. Conjectured reasons for underperformance range from tax-dilution effects to high fees, high turnover and poor asset management. In this paper, we show that this underperformance is largely due to tax-dilution effects, and not necessarily to poor management. Using a broad database of funds which includes investment trusts closed to new investment, we show that once an instrument for the time-varying tax dilution exposure is included in a factor model, there is little evidence of poor risk-adjusted performance. A style analysis of the industry demonstrates that managers appear to pursue tax-driven dynamic strategies.

Abstract:
Recent empirical evidence has suggested that the Japanese mutual fund industry has" underperformed dramatically over the past two decades. Conjectured reasons for" underperformance range from tax-dilution effects to high fees, high turnover and poor asset" management. In this paper, we show that this underperformance is largely due to tax-dilution" effects, and not necessarily to poor management. Using a broad database of funds which" includes investment trusts closed to new investment, we show that once an instrument for the" time-varying tax-dilution exposure is included in a factor model, there is little evidence of poor" risk-adjusted performance. A style analysis of the industry demonstrates that managers appear to" pursue tax-driven dynamic strategies.

Abstract:
Recent evidence suggests that global equity markets are becoming more risky. We find that much of the apparent increase in international variance and covariance of returns can be attributed to systematicvariations in global risk premia correlated across markets, rather than to any fundamental change in the risk attributes of these markets. This result has interest both for practitioners and for those interested inmodeling global asset prices.

Risk premia, international asset pricing models, global capital markets, global investments

Abstract:
Foreign investment management firms have recently started to play a major role in the investment trust business in Japan. In terms of assets under management, their size and market share have almost doubled in the past several years. In part, the relative success of foreign managed firms in attracting market share may be attributed to the fact that Japanese investment trusts have underperformed benchmarks in quite a dramatic fashion over the past two decades. This is at best indirect evidence that Japanese funds underperform their foreign counterparts. In a recent paper (Brown, Goetzmann, Hiraki, Otsuki and Shiraishi 2001) we show that the underperformance can be attributed almost entirely to the unique tax environment of Japanese investment trusts, which had the effect of heavily penalizing early withdrawals. The relaxation of these regulations coincided with a major inflow of new money into the investment trust business. We examine the relative performance of Japanese and foreign investment management firms before and after this change in tax regulations, and find that the poor relative performance of Japanese funds from April 2000 through December 2001 may in part be attributed to the huge inflow of new money into this sector and the style shifts made necessary to accommodate this flow.

Abstract:
Foreign investment management firms have recently started to play a major role in the investment trust business in Japan. In terms of assets under management, their size and market share have almost doubled in the past two years. In part, the relative success of foreign managed firms in attracting market share may be attributed to the fact that Japanese investment trusts have underperformed benchmarks in quite a dramatic fashion over the past two decades. This is at best indirect evidence that Japanese funds underperform their foreign counterparts. In a recent paper (Brown, Goetzmann, Hiraki, Otsuki and Shiraishi 2001) we show that the underperformance can be attributed almost entirely to the unique tax environment of Japanese investment trusts. In this paper we examine the relative performance issue directly by looking at week by week returns for the period January 23, 1998 through to January 14, 2000. Contrary to popular perception, Japanese managers actually outperformed their foreign counterparts over this period of time. Perhaps this indicates that Japanese managers are more skillful. However, the evidence suggests that they happened to be in the right place at the right time. We attribute the superior performance to the asset allocation decision, rather than to any superior skill in selecting securities.

Abstract:
Foreign investment management firms have recently started to play a major role in the investment trust business in Japan. In terms of assets under management, their size and market share have almost doubled in thepast two years. In part, the relative success of foreign managed firms in attracting market share may be attributed to the fact that Japanese investment trusts have underperformed benchmarks in quite a dramaticfashion over the past two decades. This is at best indirect evidence that Japanese funds underperform their foreign counterparts. In a recent paper (Brown, Goetzmann, Hiraki, Otsuki and Shiraishi 2001) we show that theunderperformance can be attributed almost entirely to the unique tax environment of Japanese investment trusts. In this paper we examine the relative performance issue directly by looking at week by week returns for the period January 23, 1998 through to January 14, 2000. Contrary to popularperception, Japanese managers actually outperformed their foreign counterparts over this period of time. Perhaps this indicates that Japanese managers are more skillful. However, the evidence suggests that theyhappened to be in the right place at the right time. We attribute the superiorperformance to the asset allocation decision, rather than to any superior skill in selecting securities.

Abstract:
In this paper, we examine how alternative corporate governance mechanisms work in Japan, using the panel data on the equity ownership and bank loans of manufacturing companies listed on the Tokyo Stock Exchange (TSE) first section over the 1985-1998 period. First, we find that the main bank borrowing is negatively related to firm value until the early 1990s, which is consistent with the view of the main bank extracting surplus from client firms. Second, we show that the cross shareholdings between the main bank and client firms are negatively related to firm value during the sample period. Third, our results on the inter-corporate shareholdings show that one-way shareholdings tend to be positively related to firm value, but cross shareholdings tend to be negatively related to firm value when their effects are statistically significant. Finally, we find that managerial ownership is monotonically and positively related to firm value. The result of a simple check suggests that the endogeneity of managerial ownership did not drive our finding at least for the second subperiod (1992-1998).

Abstract:
The exchange rate is an important variable that affects international competitiveness and performance of Japanese firms. We use an unconditional and a conditional multi-factor asset pricing model to examine whether exchange risk is recognized and priced in the Japanese stock market. The results indicate that the exchange risk is generally priced in Japan. More specifically, we provide evidence, in the unconditional model, that the exchange risk is priced in both weak and strong yen periods, when the bilateral yen/U.S. dollar exchange rate measure is used. The results are more mixed when the trade-weighted exchange rate is used. For the conditional model, the exchange risk is priced regardless of the exchange rate measure used. The combined evidence from the two models suggests an interesting observation about the role of the secular exchange rate trend in shaping the perception of exchange risk in the Japanese capital markets.