New Econometric Methods and Their Applications to Japanese Financial Markets

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The main purpose of this research project was to develop new econometric methods and apply them to analyze the data in Japanese financial markets.As for the theoretical side of the project, we have examined mainly statistical problems such as the unit root problem and the noninvertibility problem in the time series analysis from both the standard sampling approach and the Bayesian approach. Also we have proposed a new estimation method of the volatility parameter in a continuous time stochastic model.We also have conducted a number of empirical studies using the data in Japanese financial markets. We found that the distributions of stock returns are often different from the normal distributions and have large kurtosis as in the United States. We also have investigated the time varying systematicrisks and developed a dynamic factor model for the Japanese stock markets.The members of the project have written a large number of papers with the financial assistance of this project. Some of them have been already published in academic journals and the rest of them are available as working papers. The complete list of our papers have been given in our formal report.