arXiv subjects

Mikio Ito

Publications and source records attributed to Mikio Ito.

9 recordsLinked to original sources

arXiv2022

Detecting Structural Breaks in Foreign Exchange Markets by using the group LASSO technique

This article proposes an estimation method to detect breakpoints for linear time series models with their parameters that jump scarcely. Its basic idea owes the group LASSO (group least absolute shrinkage and selection operator). The method practically provides estimates of such time-varying parameters of the models. An example shows that our method can detect each structural breakpoint's date and magnitude.

econ.EM↗

arXiv2018

Discretion versus Policy Rules in Futures Markets: A Case of the Osaka-Dojima Rice Exchange, 1914-1939

We investigate the relationship between market efficiency of rice futures transaction in Osaka and the Japanese government intervention in rice distributions by directly buying and selling rice during the interwar period, from the middle 1910s to 1939, considering the context of "discretion versus rules." We use a time-varying VAR model to compare market efficiency and the government's actions over time. We found the two facts by featuring the time-varying nature of the market efficiency. First, the intervention with discretionary power disrupted the rice market and reduced market efficiency in the exchange. Second, the market efficiency improved in accordance with reduction in the government's discretionary power to operate the rice policy. When the government obtained the discretionary power to operate the policy regarding commodity market, the market efficiency often reduced. Conversely, even if the government implemented a large-scale intervention, the market efficiency improved when the government chose a systematic rule-like behavior following the law.

q-fin.ST↗

arXiv2017

Market Integration in the Prewar Japanese Rice Markets

This paper examines the integration process of the Japanese major rice markets (Tokyo and Osaka) from 1881 to 1932. Using a non-Bayesian time-varying vector error correction model, we argue that the process strongly depended on the government's policy on the network system of the telegram and telephone; rice traders with an intention to use modern communication tools were usually affected by the changes in policy. We find that (i) the Japanese rice markets had been integrated in the 1910s; (ii) increasing use of telegraphs had accelerated rice market integration from the Meiji period in Japan; and (iii) local telephone system, which reduced the time spent by urban users sending and receiving telegrams, promoted market integration.

q-fin.GN↗

arXiv2017

The Futures Premium and Rice Market Efficiency in Prewar Japan

This paper studies the interrelation between spot and futures prices in the two major rice markets in prewar Japan from the perspective of market efficiency. Applying a non-Bayesian time-varying model approach to the fundamental equation for spot returns and the futures premium, we detect when efficiency reductions in the two major rice markets occurred. We also examine how government interventions affected the rice markets in Japan, which colonized Taiwan and Korea before World War II, and argue that the function of rice futures markets crucially depended on the differences in rice spot market's structure. The increased volume of imported rice of a different variety from domestic rice first disrupted the rice futures. Then, government intervention in the rice futures markets failed to improve the disruption. Changes in colonial rice cropping successfully improved the disruption, and colonial rice was promoted to unify the different varieties of inland and colonial rice.

q-fin.ST↗

arXiv2017

An Alternative Estimation Method of a Time-Varying Parameter Model

A non-Bayesian, regression-based or generalized least squares (GLS)-based approach is formally proposed to estimate a class of time-varying AR parameter models. This approach has partly been used by Ito et al. (2014, 2016a,b), and is proven to be efficient because, unlike conventional methods, it does not require Kalman filtering and smoothing procedures, but yields a smoothed estimate that is identical to the Kalman-smoothed estimate. Unlike the maximum likelihood estimator, the possibility of the pile-up problem is negligible. In addition, this approach enables us to deal with stochastic volatility models, models with a time-dependent variance-covariance matrix, and models with non-Gaussian errors that allow us to deal with abrupt changes or structural breaks in time-varying parameters.

stat.ME↗

arXiv2017

Market Efficiency and Government Interventions in Prewar Japanese Rice Futures Markets

This study analyzes how colonial rice trade in prewar Japan affected its rice market, considering several government interventions in the two rice futures exchanges in Tokyo and Osaka. We explore the interventions in the futures markets using two procedures. First, we measure the joint degree of efficiency in the markets using a time-varying vector autoregression model. Second, we examine many historical events that possibly affected the markets and focus on one event at a time. The degree varies over time within our sample period (1881-1932). The observation, together with historical analysis, leads to the following conclusions. (1) The two major markets in Tokyo and Osaka were nearly efficient. (2) Government interventions involving the delivery of imported rice from Taiwan and Korea often reduced futures market efficiency. Finally, (3) this relationship continued as long as the quality difference between imported and domestic rice existed. The government interventions that promoted domestic distributions of the colonial goods resulted in confusion in the commodity markets, and decreased efficiency of the markets in the metropole.

q-fin.GN↗

arXiv2016

Time-Varying Comovement of Foreign Exchange Markets

A time-varying cointegration model for foreign exchange rates is presented. Unlike previous studies, we allow the loading matrix in the vector error correction (VEC) model to be varying over time. Because the loading matrix in the VEC model is associated with the speed at which deviations from the long-run relationship disappear, we propose a new degree of market comovement\ based on the time-varying loading matrix to measure the strength or robustness of the long-run relationship over time. Since exchange rates are determined by macrovariables, cointegration among exchange rates implies those macroeconomic variables share common stochastic trends. Therefore, the proposed degree measures the degree of market comovement. Our main finding is that the market comovement has become stronger over the past quarter century, but the rate at which market comovement strengthens is decreasing with two major turning points: one in 1995 and the other one in 2008.

q-fin.ST↗

arXiv2015

The Evolution of Stock Market Efficiency in the US: A Non-Bayesian Time-Varying Model Approach

A non-Bayesian time-varying model is developed by introducing the concept of the degree of market efficiency that varies over time. This model may be seen as a reflection of the idea that continuous technological progress alters the trading environment over time. With new methodologies and a new measure of the degree of market efficiency, we examine whether the US stock market evolves over time. In particular, a time-varying autoregressive (TV-AR) model is employed. Our main findings are: (i) the US stock market has evolved over time and the degree of market efficiency has cyclical fluctuations with a considerably long periodicity, from 30 to 40 years; and (ii) the US stock market has been efficient with the exception of four times in our sample period: during the long-recession of 1873-1879; the recession of 1902-1904; the New Deal era; and the recession of 1957-1958 and soon after it. It is then shown that our results are partly consistent with the view of behavioral finance.

q-fin.ST↗

arXiv2014

International Stock Market Efficiency: A Non-Bayesian Time-Varying Model Approach

This paper develops a non-Bayesian methodology to analyze the time-varying structure of international linkages and market efficiency in G7 countries. We consider a non-Bayesian time-varying vector autoregressive (TV-VAR) model, and apply it to estimate the joint degree of market efficiency in the sense of Fama (1970, 1991). Our empirical results provide a new perspective that the international linkages and market efficiency change over time and that their behaviors correspond well to historical events of the international financial system.

q-fin.ST↗