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Size and liquidity effects in Japanese regional stock markets

Size and liquidity effects in Japanese regional stock markets
Size and liquidity effects in Japanese regional stock markets

This paper assesses the effectiveness of traded turnover, Amihud (2002) and Liu (2006) metrics in measuring illiquidity, as used in a multifactor CAPM. The performance of this model is contrasted using a unique sample from Japan's regional stock exchanges, namely Sapporo, Nagoya, Fukuoka, Osaka and Tokyo. The evidence suggests that size effects are important in Tokyo, liquidity plays a more important role in the conditional modelling of returns particularly in the smaller markets of Sapporo, Fukuoka and Nagoya where costs of equity are highest.

Japan, Liquidity, Portfolio diversification, Regional financial markets
0889-1583
157-181
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2

Hearn, Bruce (2011) Size and liquidity effects in Japanese regional stock markets. Journal of the Japanese and International Economy, 25 (2), 157-181. (doi:10.1016/j.jjie.2011.02.004).

Record type: Article

Abstract

This paper assesses the effectiveness of traded turnover, Amihud (2002) and Liu (2006) metrics in measuring illiquidity, as used in a multifactor CAPM. The performance of this model is contrasted using a unique sample from Japan's regional stock exchanges, namely Sapporo, Nagoya, Fukuoka, Osaka and Tokyo. The evidence suggests that size effects are important in Tokyo, liquidity plays a more important role in the conditional modelling of returns particularly in the smaller markets of Sapporo, Fukuoka and Nagoya where costs of equity are highest.

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e-pub ahead of print date: 3 March 2011
Published date: June 2011
Keywords: Japan, Liquidity, Portfolio diversification, Regional financial markets

Identifiers

Local EPrints ID: 423321
URI: http://eprints.soton.ac.uk/id/eprint/423321
ISSN: 0889-1583
PURE UUID: 172d1311-e79b-46a9-86ec-338c2eb1c6bf
ORCID for Bruce Hearn: ORCID iD orcid.org/0000-0001-9767-0198

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Date deposited: 20 Sep 2018 16:30
Last modified: 24 Sep 2019 00:23

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Author: Bruce Hearn ORCID iD

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