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Research Paper | Finance | Nepal | Volume 8 Issue 1, January 2019

A Cross-Country Stock Return Analysis: Evidence from Japan and United States of America

Shiba Prasad Sapkota ^[2]

Abstract: This study has been employed, descriptive and analytical methods to examine the long-term relationship and causation with country-specific variable; size of stock market (market capitalization in percentage of GDP) and stock traded turnover ratio, as well as macroeconomic variables; inflation rate, GDP growth rate, exchange rate, real interest rate, money supply in percentage of GDP and trade openness. For the examination of empirical evidence, the stock market of United States of America and Japan have been chosen purposively, for the period of 1980 to 2015. The correlation, regression, cointegration and causality has been examined. The variables have found negative correlation with size, stock traded turnover ratio, inflation rate, GDP growth rate and interest rate. Whereas, the relationship between stock return and money supply, trade openness and exchange rate have found positive relation with stock return. Similarly, size, stock traded turnover ratio, trade openness, money supply and interest rate have significant relationship, but exchange rate, inflation and GDP growth rate have found insignificant relationship. In the context of Japan there has five variables that have long-term relationship with stock return and four variables in the context of United States. Finally, stock return has predictability to size, stock traded turnover ratio, interest rate and GDP growth but other variables. In the other ways round, trade openness has predictability to stock return but other variables.

Keywords: stock return, country-specific variables, macro-economic variables, relationship, long-term relationship and causation

Edition: Volume 8 Issue 1, January 2019,

Pages: 1319 - 1328

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