Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics?

Daniel, Kent D.; Wei, K.C. John; Titman, Sheridan

Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics?

NBER Working Paper No. w7246

31 Pages Posted: 28 Apr 2000 Last revised: 5 May 2000

See all articles by Kent D. Daniel

Kent D. Daniel

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: July 1999

Abstract

Japanese stock returns are even more closely related to their book-to-market ratios than are their U.S. counterparts, and thus provide a good setting for testing whether the return premia associated with these characteristics arise because the characteristics are proxies for covariance with priced factors. Our tests, which replicate the Daniel and Titman (1997) tests on a Japanese sample, reject the Fama and French (1993) three-factor model but fails to reject the characteristic model.

Suggested Citation: Suggested Citation

Daniel, Kent D. and Wei, Kuo-Chiang (John) and Titman, Sheridan, Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics? (July 1999). NBER Working Paper No. w7246, Available at SSRN: https://ssrn.com/abstract=202433