finance Essay example
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Finance & Accounting
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Evaluation of the Japanese stock exchange (Name) (University) (Course) (Tutor) (Date) Introduction For the past few decades beginning from the 1950s, scholars and academicians from all over the world have carried out empirical studies aimed at testing the market efficiency and the random walk problems in various equity markets all over the world…

Introduction

Most of these tests however have been carried out in the developed countries and have largely ignored the developing countries. This paper seeks to discuss the levels of market efficiency in the Japanese equity markets in order to determine whether they are successful or not. This will be done by evaluating several empirical studies carried out in the same. Market efficiency literature review Kono, Yatrakis & Segal (2011) carried out a study on the Japanese stock market efficiency. The authors sought to compare the performance of a stock portfolio that consisted of exchange-traded funds (ETFs) against the performance of the overall stock market which was represented by the Topix Index. This was carried out using data that was available from the 30 June 2008 to 30 June 2009. In their study, they constructed the exchange traded funds according to the Modern portfolio theory that was developed in 1952 by Harry Markowitz. The study was based on the null hypothesis that “A portfolio composed of Japanese ETFs and constructed according to the MPT provides a higher return per unit of risk than the Topix Index”. In order to arrive at the optimal portfolio of ETFs, the authors used the statistical data related to the ETFs, the mean variance optimisation model of the MPT and the risk free rates as well as the expected market return. ...
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