Factors, Characteristics and Endogenous Structural Breaks: Evidence from Japan

36 Pages Posted: 18 Aug 2011

See all articles by Pin-Huang Chou

Pin-Huang Chou

National Central University

Kuan-Cheng Ko

National Chi Nan University - College of Management

Shinn-Juh Lin

National Chengchi University

Date Written: August 17, 2011

Abstract

Using an updated Japanese sample covering the 1975-2006 period, we reexamine whether it is Fama and French's (1993) three-factor model or Daniel and Titman's (1997) characteristic model that better explains stock returns in the Japanese market. In contrast to Daniel, Titman, and Wei (2001), we find that the three-factor model works well for this updated sample. Further analysis identifies a structural break date in October 1997, which coincides with the publication date of Daniel and Titman's article. In particular, the characteristic model is supported before 1997, but not after; the Japanese evidence is similar to the U.S. evidence, as documented by Davis, Fama, and French (2000).

Keywords: factor model, characteristic model, structural break, Japanese market

JEL Classification: C13, C22, G12

Suggested Citation

Chou, Pin-Huang and Ko, Kuan-Cheng and Lin, Shinn-Juh, Factors, Characteristics and Endogenous Structural Breaks: Evidence from Japan (August 17, 2011). Available at SSRN: https://ssrn.com/abstract=1911691 or http://dx.doi.org/10.2139/ssrn.1911691

Pin-Huang Chou

National Central University ( email )

Department of Finance
Taoyuan, 32001
Taiwan
886-3-4227151 ext 66270 (Phone)
886-3-4252961 (Fax)

HOME PAGE: http://mgt.ncu.edu.tw/~choup

Kuan-Cheng Ko (Contact Author)

National Chi Nan University - College of Management ( email )

Taiwan
886-49-2910960 ext. 4695 (Phone)
886-49-2914511 (Fax)

Shinn-Juh Lin

National Chengchi University ( email )

Taiwan
+886-2-2939-3091 ext. 81106 (Phone)
+886-2-29387699 (Fax)

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