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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26497
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| Title: | Idiosyncratic Risk and Creative Destruction in Japan |
| Authors: | Hamao, Yasushi
Mei, Jianping
Xu, Yexiao |
| Issue Date: | 5-Nov-2002 |
| Series/Report no.: | FIN-02-053 |
| Abstract: | The dramatic rise and fall of the Japanese equity market provides a
unique opportunity to examine market-and firm-specific risks over
different market conditions. The price behavior of Japanese equities in
the 1990s is found to resemble that of U.S. equities during the Great
Depression. Both show increasing market volatility and a prolonged large
co-movement in equity prices. What is unique about the Japanese case is
the surprising fall in firm-level volatility and turnover in Japanese
stocks after its market crash in 1990. This large decrease in firm-level
volatility may have impeded Japan’s capital formation process as
it has become more difficult over the past decade for both investors and
managers to separate high quality from low quality firms. Using data on
firm performance fundamentals and corporate bankruptcies, we show that
the fall in firm-level volatility and turnover could be attributed to
the sharp increase in earnings homogeneity among Japanese firms and the
lack of corporate restructuring. |
| URI: | http://hdl.handle.net/2451/26497 |
| Appears in Collections: | Finance Working Papers
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