Have Japanese Individual Stocks Become More Volatile ? an Analysis Based on Risk Decomposition and the Implication for International Diversification

Content Provider	Semantic Scholar
Author	Chen, C. R.
Copyright Year	2003
Abstract	This paper adopts the risk decomposition method developed by Campbell, Lettau, Malkiel and Xu(2001) to study volatility in the Japanese stock market for the period from 1976 to 1998. We believe this is the first study that investigates the Japanese stock market volatility in three components. Contrary to the US experience, both the idiosyncratic risk and industrylevel volatility have declined, while the market-level volatility has increased significantly and contributed to higher aggregate market volatility in recent years. From the late 80s onwards, pair-wise stock returns correlations have increased approximately three folds. The higher marketlevel volatility and stock returns correlations in recent years have adverse effect on portfolio diversification which in turn hampers the effectiveness of global diversification.
File Format	PDF HTM / HTML
Alternate Webpage(s)	http://www.sba.udayton.edu/research/working_papers/wp13.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article