An Analysis of the Relative Performance of Japanese and Foreign Money Management

22 Pages Posted: 13 Nov 2008

See all articles by Stephen J. Brown

Stephen J. Brown

New York University - Stern School of Business

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Takato Hiraki

International University of Japan

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations

Multiple version iconThere are 5 versions of this paper

Date Written: May 2001

Abstract

Foreign investment management firms have recently started to play a major role in the investment trust business in Japan. In terms of assets under management, their size and market share have almost doubled in the past two years. In part, the relative success of foreign managed firms in attracting market share may be attributed to the fact that Japanese investment trusts have underperformed benchmarks in quite a dramatic fashion over the past two decades. This is at best indirect evidence that Japanese funds underperform their foreign counterparts. In a recent paper (Brown, Goetzmann, Hiraki, Otsuki and Shiraishi 2001) we show that the underperformance can be attributed almost entirely to the unique tax environment of Japanese investment trusts. In this paper we examine the relative performance issue directly by looking at week by week returns for the period January 23, 1998 through to January 14, 2000. Contrary to popular perception, Japanese managers actually outperformed their foreign counterparts over this period of time. Perhaps this indicates that Japanese managers are more skillful. However, the evidence suggests that they happened to be in the right place at the right time. We attribute the superior performance to the asset allocation decision, rather than to any superior skill in selecting securities.

Suggested Citation

Brown, Stephen J. and Goetzmann, William N. and Hiraki, Takato and Shiraishi, Noriyoshi, An Analysis of the Relative Performance of Japanese and Foreign Money Management (May 2001). NYU Working Paper No. S-AM-01-03, Available at SSRN: https://ssrn.com/abstract=1300800

Stephen J. Brown

New York University - Stern School of Business ( email )

Stern School of Business
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William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

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National Bureau of Economic Research (NBER)

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Takato Hiraki

International University of Japan ( email )

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Japan
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Noriyoshi Shiraishi

Rikkyo University - School of Social Relations ( email )

3-chome Nishi-ikebukuro
Toshima-ku
Tokyo, 171-8501
Japan

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