An Analysis of Japanese Stock Return Dynamics Conditional on U.S. Monday Holiday Closures

FRB Atlanta Working Paper No. 2000-6

26 Pages Posted: 24 Jul 2000  

Takato Hiraki

Tokyo University of Science - School of Management

Edwin D. Maberly

Monash University

Date Written: June 2000

Abstract

This paper examines a unique data set consisting of Japanese equity returns for the Friday, Monday, and Tuesday surrounding U.S. Monday holiday closures. The objective is to neutralize the impact of spillover effects from New York to Tokyo. Prior studies find that Japanese returns are negative on Tuesday and anomalous; this phenomenon is known as the Japanese-Tuesday effect. One explanation for the Japanese-Tuesday effect is that there exists a cause and effect relationship with Monday returns in New York. Historically, Monday returns in New York are negative, a phenomenon known as the U.S.-Monday effect. The empirical results show that U.S. Monday closures have a significant impact on Japanese return dynamics for surrounding trading days. The empirical evidence does not support the hypothesis that the U.S.-Monday and Japanese-Tuesday effects are related. Potential explanations for the occurrence and then disappearance of the Japanese-Tuesday effect rely on microstructure properties unique to Tokyo. More recently, spillover effects from New York to Tokyo have increased in intensity, and this is attributed to the introduction of the Nikkei 225 index on the SIMEX.

Keywords: Spillover effects, Japanese-Tuesday effect, market efficiency

JEL Classification: F30, G14

Suggested Citation

Hiraki, Takato and Maberly, Edwin D., An Analysis of Japanese Stock Return Dynamics Conditional on U.S. Monday Holiday Closures (June 2000). FRB Atlanta Working Paper No. 2000-6. Available at SSRN: https://ssrn.com/abstract=235008 or http://dx.doi.org/10.2139/ssrn.235008

Takato Hiraki (Contact Author)

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)

Edwin D. Maberly

Monash University ( email )

Clayton Campus
Wellington Road
Clayton, VIC 3800
Australia
61399055178 (Phone)

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