On the Long-Run Holding Returns of Japanese Stocks: Individual Stocks vs. Portfolios

29 Pages Posted: 23 Aug 2010

See all articles by Keiichi Kubota

Keiichi Kubota

Chuo University - Graduate School of Strategic Management

Toshifumi Tokunaga

Musashi University - Department of Finance

Kenji Wada

Keio University - Faculty of Business & Commerce

Date Written: August 19, 2010

Abstract

We investigate the long-run holding returns of the stocks listed on eight Japanese stock exchanges with weekly return data from 1977 through 2007. We find existence of significant positive autocorrelations for the smallest and the middle quintile portfolios from the variance ratio test, but not for the largest. However, returns are negatively correlated at the individual stock level and positively correlated at the portfolio level. We demonstrate that the negative correlation disappears as the number of stocks in each portfolio is increased to four, which shows the idiosyncratic risk of individual stock is dominated by the positive autocorrelation at the portfolio level.

Keywords: Random Walk, Variance Ratio Test, Autocorrelation, Auto-Covariance

JEL Classification: G11, G14, G15, C12

Suggested Citation

Kubota, Keiichi and Tokunaga, Toshifumi and Wada, Kenji, On the Long-Run Holding Returns of Japanese Stocks: Individual Stocks vs. Portfolios (August 19, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1663758 or http://dx.doi.org/10.2139/ssrn.1663758

Keiichi Kubota

Chuo University - Graduate School of Strategic Management ( email )

1-13-27, Kasuga
Bunkyo-ku
Tokyo, 112-8551
Japan
81-3-3817-7478 (Phone)
81-3-3817-7444 (Fax)

Toshifumi Tokunaga (Contact Author)

Musashi University - Department of Finance ( email )

1-26-1 Toyotamakami
Nerima Tokyo, 1768534
Japan

Kenji Wada

Keio University - Faculty of Business & Commerce ( email )

2-15-45 Mita
Minato-ku
Tokyo 108-8345
Japan

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