Jy. Campbell et Y. Hamao, PREDICTABLE STOCK RETURNS IN THE UNITED-STATES AND JAPAN - A STUDY OFLONG-TERM CAPITAL-MARKET INTEGRATION, The Journal of finance, 47(1), 1992, pp. 43-69
This paper uses the predictability of monthly excess returns on U.S. a
nd Japanese equity portfolios over the U.S. Treasury bill rate to stud
y the integration of long-term capital markets in these two countries.
During the period 1971-1990 similar variables, including the dividend
-price ratio and interest rate variables, help to forecast excess retu
rns in each country. In addition, in the 1980's U.S. variables help to
forecast excess Japanese stock returns. There is some evidence of com
mon movement in expected excess returns across the two countries, whic
h is suggestive of integration of long-term capital markets.