To read the full version of this content please select one of the options below:

Expected return, liquidity risk, and contrarian strategy: evidence from the Tokyo Stock Exchange

Keiichi Kubota (Graduate School of Strategic Management, Chuo University, Tokyo, Japan)
Hitoshi Takehara (Graduate School of Finance, Accounting, and Law, Waseda University, Tokyo, Japan)

Managerial Finance

ISSN: 0307-4358

Article publication date: 6 July 2010



The purpose of this paper is to determine the best conditional asset pricing model for the Tokyo Stock Exchange sample by utilizing long‐run daily data. It aims to investigate whether there are any other firm‐specific variables that can explain abnormal returns of the estimated asset pricing model.


The individual firm sample was used to conduct various cross‐sectional tests of conditional asset pricing models, at the same time as using test portfolios in order to confirm the mean variance efficiency of basic unconditional models.


The paper's multifactor models in unconditional forms are rejected, with the exception of the five‐factor model. Further, the five‐factor model is better overall than the Fama and French model and other alternative models, according to both the Gibbons, Ross, and Shanken test and the Hansen and Jagannathan distance measure test. Next, using the final conditional five‐factor model as the de facto model, it was determined that the turnover ratio and the size can consistently predict Jensen's alphas. The book‐to‐market ratio (BM) and the past one‐year returns can also significantly predict the alpha, albeit to a lesser extent.


In the literature related to Japanese data, there has never been a comprehensive test of conditional asset pricing models using the long‐run data of individual firms. The conditional asset pricing model derived for this study has led to new findings about the predictability of past one‐year returns and the turnover ratio.



Kubota, K. and Takehara, H. (2010), "Expected return, liquidity risk, and contrarian strategy: evidence from the Tokyo Stock Exchange", Managerial Finance, Vol. 36 No. 8, pp. 655-679.



Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited