TY  - JOUR
AU  - Hamao,Yasushi
AU  - Mei,Jianping
AU  - Xu,Yexiao
TI  - Idiosyncratic Risk and the Creative Destruction in Japan
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9642
PY  - 2003
Y2  - April 2003
UR  - http://www.nber.org/papers/w9642
L1  - http://www.nber.org/papers/w9642.pdf
N1  - Author contact info:
Yasushi Hamao
University of Southern California
Marshall School of Business
3670 Trousdale Parkway, Bridge Hall 308
University of Southern California
Los Angeles, CA  90089-0804
Tel: 213/740-0822;  hamao@usc.edu
E-Mail: hamao@usc.edu

Jianping Mei
Stern School of Business
Henery Kaufman Management Center
New York University
44 W 4th Street, 7-69
New York, NY 10012
Tel: 212/998-0354
Fax: 212/995-4221
E-Mail: jmei@stern.nyu.edu

Yexiao Xu
School of Management
University of Texas at Dallas
Richardson, TX  75083
E-Mail: yexiaoxu@utdallas.edu
AB  - The dramatic rise and fall of the Japanese equity market provides a unique opportunity to examine market-and firm-specific risks over different market conditions. The price behavior of Japanese equities in the 1990s is found to resemble that of U.S. equities during the Great Depression. Both show increasing market volatility and a prolonged large co-movement in equity prices. What is unique about the Japanese case is the surprising fall in firm-level volatility and turnover in Japanese stocks after its market crash in 1990. This large decrease in firm-level volatility may have impeded Japan's capital formation process as it has become more difficult over the past decade for both investors and managers to separate high quality from low quality firms. Using data on firm performance fundamentals and corporate bankruptcies, we show that the fall in firm-level volatility and turnover in Japanese stocks could be attributed to the sharp increase in earnings homogeneity among Japanese firms and the lack of corporate restructuring.
ER  -