Showing papers on "Market capitalization published in 1993"

International stock market linkages: Evidence from the pre- and post-October 1987 period

Abstract: This paper uses recent developments in the theory of cointegration to provide new methods of testing the linkage and dynamic interactions among stock market movements. Our findings are in sharp contrast with previous research which discovered strong interdependence among national stock markets prior to October 1987. For the post-October 1987 period, however, our results show that the degree of international co-movements among stock price indices has increased substantially, with the Nikkei index the only exception. Furthermore, the US stock market is found to have a considerable impact on the French, German and UK markets in the post-crash period. We also find the response of the French, German and UK markets to US stock market innovations to be consistent with the view of cross-border informationally efficient stock markets. Finally, we find the Japanese equity market performance to have no links with both the US stock market and the stock markets in France, Germany and UK during the pre-and post-October crash period.

Land and Stock Prices in Japan

Abstract: In late 1991, the total land value in Japan was estimated at nearly $20 trillion. This was more than 20 percent of the world's wealth, or to put it in some other contexts, about double the world's equity markets or half again as large as the world's bond markets. Japanese land was then valued at about five times that of the United States; the land under the Emperor's Palace, which is about three-quarters of a square mile, was estimated to be worth about the same as all the land in California or in Canada. Real estate assets of Japanese corporations grew by $2.8 trillion from 1986 to 1988, an increase in valuation roughly equal to the size of the Japanese gross national product. An equally dramatic rise in stock prices accompanied the rise in land prices. At its peak in December 1989, the Japanese stock market had a value of about $4 trillion, which was about 44 percent of the world's equity market capitalization. To put that figure in perspective, the value of the equity on all the stock exchanges in the United States in August 1992 was less than $5 trillion. But then, from its peak in December 1989 to August 1992, the Japanese stock market fell by over 60 percent. Various indices of speculative land values fell a similar amount. Meanwhile, other land prices—industrial, commercial, residential, as measured by various indices—fell 15–20 percent. This paper discusses the rise of Japanese stock and land prices in the past four decades and their dramatic decline in the early 1990s. To what extent can

Time varying volatilities and calculation of the weighted implied standard deviation

Abstract: Rogalski-Tinic have reported a monthly pattern in ex post stock return variances that differs between small and large market capitalization firms. Maloney-Rogalski find that option prices reflect these monthly patterns ex ante. This study extends Maloney-Rogalski's work by devising an expiration-specific weighted implied standard deviation (WISD). It is found that: i) the monthly patterns in one-month WISDs are basically similar to the monthly patterns in ex post variances detected by Rogalski-Tinic for both large and small size firms, and ii) use of expiration-specific WISDs, as opposed to standard composite WISDs, results in improved performance of option pricing models.

Further evidence on causality and feedback across international stocks

Abstract: This study extends the previous research on interdependence of international stock markets by using Geweke's (1982) causality test on seventeen stock market indices. The impact of the stock market crash of October 1987 on other national stock markets is investigated by disaggregating the data into pre- and post-crash periods. Direction of causality and feedback is studied using standard causality tests. The results indicate very few stock markets (namely, the U.K. and the U.S.A.) influence other markets significantly. Almost all markets react to other markets' past and present movements. Traditional major markets (Japan, France, and Canada) do not seem to be influential at all.

Emerging Equity Markets Tapping into Global Investment Flows

Abstract: In recent years, many developing countries have undertaken important, policy reforms, in cluding measures intended to stimulate domestic and international investor interest in locally issued and traded shares, in order to professionalize local equity markets and mobi lize investor capital for future, more complex stages of economic growth. This study assesses emerging-market characteristics, specifically market capitalization, trading volumes, turn over ratios and cross-border equity flows. It then links these developments to international investor interest, particularly in the light of the low correlations that exist between the return performance of emerging and developed equity markets and the resulting unusually high value to asset-holders of international portfolio diversification. We then identify the princi pal quantitative and structural factors that appear to explain the differential growth and development of emerging equity markets, both conceptually and empirically, using straight forward pooled regression methodology. Policy options for improving the functioning of emerging equity markets and their linkage into one of the most rapidly evolving dimensions of global capital flows are discussed. The development of efficient domestic capital markets, especially for equities, carries with it significant potential benefits in terms of both the quantitative and qualitative dimensions of economic growth. These are achieved through improved static and dynamic efficiencies in the domestic financial market, facilitating privatiza tion of state-owned enterprises and initial public offerings, improving the process of corporate control, and tapping into global flows of portfolio investments. Further social gains may be achieved through the spread of public ownership of corpo rate shares, mutual funds, pension funds and other collective investment structures giving the general public a significant stake in the operation of the