Fundamentals and Stock Returns in Japan

LOUIS K.C. CHAN, YASUSHI HAMAO, JOSEF LAKONISHOK

Research output: Contribution to journalArticlepeer-review

Abstract

This paper relates cross‐sectional differences in returns on Japanese stocks to the underlying behavior of four variables: earnings yield, size, book to market ratio, and cash flow yield. Alternative statistical specifications and various estimation methods are applied to a comprehensive, high‐quality data set that extends from 1971 to 1988. The sample includes both manufacturing and nonmanufacturing firms, companies from both sections of the Tokyo Stock Exchange, and also delisted securities. Our findings reveal a significant relationship between these variables and expected returns in the Japanese market. Of the four variables considered, the book to market ratio and cash flow yield have the most significant positive impact on expected returns. 1991 The American Finance Association

Original languageEnglish (US)
Pages (from-to)1739-1764
Number of pages26
JournalThe Journal of Finance
Volume46
Issue number5
DOIs
StatePublished - Dec 1991
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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