Trading Volume for Winners and Losers on the Tokyo Stock Exchange

J. OF FINANCIAL AND QUANTITATIVE ANALYSIS, March 1996

Posted: 11 Sep 1996

See all articles by Marc Bremer

Marc Bremer

Nanzan University

Kiyoshi Kato

Kobe University - Graduate School of Business Administration

Abstract

This paper examines trading volume on the Tokyo Stock Exchange. Traditional theory suggests that taxes create strong incentives to delay realization of capital gains and accelerate realization of losses. Contrary to the theory, we find strong evidence that turnover is higher for stocks with gains (winners) than for stocks with losses (losers). In particular, the winner stocks of keiretsu firms tend to have high end-of-fiscal-year turnover. This is true even when realizing gains could result in higher tax liabilities. We conclude that capital gains taxes have only a small impact on turnover in Japan. Other non-tax-related motives, especially window dressing motivated trades appear to dominate investor behavior. We find strong evidence that this window dressing is concentrated in the stock of keiretsu firms.

JEL Classification: G15

Suggested Citation

Bremer, Marc and Kato, Hideaki Kiyoshi, Trading Volume for Winners and Losers on the Tokyo Stock Exchange. J. OF FINANCIAL AND QUANTITATIVE ANALYSIS, March 1996. Available at SSRN: https://ssrn.com/abstract=7721

Marc Bremer (Contact Author)

Nanzan University ( email )

18 Yamazato-cho
Showa-ku
Nagoya 466
Japan
81 052 832-3111 (Phone)
81 052 832-2104 (Fax)

Hideaki Kiyoshi Kato

Kobe University - Graduate School of Business Administration ( email )

3-7-2 Shimiyoshiyamate
Higashinada-ku
Kobe, Hyogo 658-0063, Hyogo 657-8501
Japan

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