← Search

Journal of Financial Economics Vol. 29 No. 2 1991

Were Japanese stock prices too high?

Kenneth R. French1,2,3; James M. Poterba2,4

1 Dartmouth College · 2 National Bureau of Economic Research · 3 University of Chicago · 4 Massachusetts Institute of Technology

open access

Abstract

This paper asks whether market fundamentals can explain the recent run-up and decline of Japanese equity values and price-earnings ratios. Accounting differences explain about half of the long-run disparity between U.S. and Japanese P/Es. For example, if Japanese firms used U.S. accounting rules, the Japanese P/E ratio would have been 32.6, not 53.7, in 1989. Accounting differences cannot, however, explain the doubling of this ratio in 1986, nor its decline in 1990. Similarly, we are unable to isolate changes in required stock returns or growth expectations that are large enough to explain recent Japanese stock price movements.

DOI
10.1016/0304-405x(91)90006-6
Volume
29
Issue
2
Pages
337-363
Language
en
Sources
bibtex:phds-export.bib openalex crossref

Cite