Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics?
31 Pages Posted: 28 Apr 2000 Last revised: 5 May 2000
Date Written: July 1999
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.
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