Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79572
Authors: 
Chen, Wenjuan
Velinov, Anton
Year of Publication: 
2012
Series/Report no.: 
SFB 649 Discussion Paper 2012-037
Abstract: 
This paper investigates to what extent the fundamentals of the real economy are reflected in the stock prices of Japan. A Markov switching VAR model with switching variances is used to test the structural identification scheme. Identification of fundamental and nonfundamental shocks is shown to be supported by the data. Based on the appropriate structural restriction, the historical stock prices are decomposed into fundamental components and nonfundamental components. The decomposition shows that the linkage between Japanese stock prices and real activity shocks became strengthened since the bubble collapsed in the beginning of 1990s.
Subjects: 
Stock price
real activity
financial crisis
structural restrictions
JEL: 
G12
E23
Document Type: 
Working Paper

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