An Analysis of the Relative Performance of Japanese and Foreign Money Management

38 Pages Posted: 3 Nov 2008  

Stephen J. Brown

New York University - Stern School of Business

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Takato Hiraki

Tokyo University of Science - School of Management

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations

Multiple version iconThere are 5 versions of this paper

Date Written: September 2002

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.

Suggested Citation

Brown, Stephen J. and Goetzmann, William N. and Hiraki, Takato and Shiraishi, Noriyoshi, An Analysis of the Relative Performance of Japanese and Foreign Money Management (September 2002). NYU Working Paper No. FIN-02-028. Available at SSRN: https://ssrn.com/abstract=1294206

Stephen J. Brown

New York University - Stern School of Business ( email )

Stern School of Business
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New York, NY 10012-1126
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William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Takato Hiraki

Tokyo University of Science - School of Management ( email )

6-3-1 NiiJuku Katsushika-Ku
Tokyo, 125-8585
Japan
+81-480-21-7611 (Phone)
+81-480-21-7654 (Fax)

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations ( email )

3-chome Nishi-ikebukuro
Toshima-ku
Tokyo, 171-8501
Japan

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