Size and Liquidity Effects in Japanese Regional Stock Markets

39 Pages Posted: 12 Jan 2010 Last revised: 19 Nov 2012

Date Written: January 12, 2010


This paper assesses the effectiveness of traded turnover, Amihud (2002) and Liu (2006) metrics in measuring illiquidity, as used in a multifactor CAPM. The performance of this model is contrasted using a unique sample from Japan’s regional stock exchanges, namely Sapporo, Nagoya, Fukuoka, Osaka and Tokyo. The evidence suggests that size effects are important in Tokyo, liquidity plays a more important role in the conditional modelling of returns particularly in the smaller markets of Sapporo, Fukuoka and Nagoya where costs of equity are highest.

Keywords: Liquidity, Portfolio Diversification, Regional Financial Markets, Japan

JEL Classification: G11, G12, G15, O55

Suggested Citation

Hearn, Bruce Allen, Size and Liquidity Effects in Japanese Regional Stock Markets (January 12, 2010). Journal of Japanese and International Economies, Vol. 25, No. 2, 2011. Available at SSRN: or

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

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