A New Daily Indicator for Fiscal News in Japan · 2016-03-20 · A New Daily Indicator for Fiscal News in Japan Etsuro Shioji (Hitotsubashi) (Hiroshi Morita (JSPS) to be added as

ANewDailyIndicatorforFiscalNewsinJapan

EtsuroShioji(Hitotsubashi)(HiroshiMorita(JSPS)tobeaddedasco-author,infuture)

1

AJRC-HIAS,March21-22,2016@ANU

OverviewoftheenNreproject

•  Topic=EsNmaNonofimpactsoffiscalpolicy(FP).

•  MoNvaNonbehindthisstudy

=“Fiscalforesight”problem

•  Wedevelopanewapproachtoovercomeit.

•  Result=ConstrucNonofadailyindicatorofnewsaboutFP(moreprecisely,publicinvestment)forJapan.

2

Thispaper

•  PublicInvestmentIndicator,MarkIII

– SeekabeVerwaytoextractinformaNonaboutexpectaNonsaboutfuturepoliciesfromstockmarketdata.

3

1.IntroducNon

4

1.1Whatisthe“Fiscalforesight”problem?

•  TradiNonalidenNficaNon:FPshock=unexpectedchangesinactualspending.

•  BUT!Inreality,muchofFPisexpectedbytheNmethespendingismade.

•  IfagentsareraNonal,theywouldstartadjusNngtheirbehaviorsassoonasthenewsarrives!（Ramey(2011)“It’sallintheNming”.）

5

TwoexisNngapproachestodealwiththeproblem:

“Fiscalforesight”Problem

“News”approach

Stockmarketbasedapproach

6

Thispaperstandsatthecrossroadsbetweenthetwo

approaches.

7

1.2.News-basedapproach

•  IdenNfydateswhentheFPnewsfirstarrived.•  Setupdummiesforthosedates.

•  Ramey&Shapiro(Carnegie1997),Ramey(QJE2011):– newsaboutfutureUSmilitaryspending.

8

ForJapan:

•  Fukuda&Yamada(JJIE2011):– NewsonEmergencyFiscalSPmulusPackages.

• Miyazaki(JWE2010):– VARwithdummiesforthosedates.

9

•  Drawbacks– Dummiescannotconveythesenseofmagnitude:arewetalkingaboutmillionsofEurosorbillions?– Moreimportantly,wedonotknowhowbigasurprisethenewswas!

10

1.3.Stockmarketbasedapproach

•  Idea:People’sexpectaNonsshouldbereflectedinstockprices.– LookatfirmsthataredeeplydependentonFP!

•  Fisher&Peters(EJ2010)– excessreturn(=individualreturn–marketreturn)onfourlargemilitarycontractorsintheUS.

11

•  Drawbacks– Contaminatedsignal:Stockreturnscouldreflectmanythings,notjustFP…•  evenforthosefirmsthatareheavilyFPdependent.

– Excessreturnsmightevenbecorrelatedwithmarketreturns,unlessthe“beta”isequalto1.

12

ForJapan:Morita(Ph.D.thesis,2014)– ExcessstockreturnsoftheConstrucPonIndustry.– “Purified”measure:extractapartofthechangesinthereturnsthatarecorrelatedwithfutureG.•  BasedontheVARwithsignrestricNons.

13

1.4.ThisProject

•  CombineFukuda&Yamada(2011)andMorita(2014)…andtakesonestepfurther!

•  StudyexcessreturnsofindividualcompaniesintheconstrucNonindustryonthenewsdates.

•  Summarizetheinfointoasingleseries.

14

•  Advantages:– ThisapproachallowsustoobtainasinglePmeseriesofnewsindicator.– Itreflectsthemagnitudesofthesurprisesgeneratedbythenews.– AswefocusonthedaysonwhichFPnewsarrived,itislikelytobelesscontaminatedbyothertypesofshocks.

15

1.5ThispresentaNon

•  IshallskipdiscussionabouttheselecNonofthenewsdates(RefertoAppendixA).

•  FocusonhowtobeVer(hopefully)extractinformaNonfromthestockmarket.

16

StructureofpresentaNon

1.  IntroducNon2.  Ideasbehindourpreviousindicators3.  Ideasbehindthenewone4.  FactorAnalysisandFactorRotaNons5.  PublicInvestmentIndicatorMarkIII6.  VARanalysis7.  Conclusions

17

2.IdeasbehindourPreviousIndicators(MarkI&II)

18

Stockreturnsdata

•  ConstrucNonindustry’s177firms,listedonTokyoStockExchange(1stor2nd),atsomepointbetween1974and2014.

•  Returns=logdifferenceofthecloseprice,daily.

•  RegressthemontheMarket(TOPIX)returntoobtainexcessreturns.

19

Historyofourproject

•  MarkI:UNlizeinfoonalltheconstrucNonfirms.

•  MarkII:UNlizeinfoonheavilypublic-investmentdependentfirmsonly.

•  MarkIII:tobeexplainedbelow…

20

Public-InvestmentDependentFirms

•  BasedonEDINET:shareof“government”in“completedworks”inFY2012-3.

21

Nick-name

Companyname Shareofgovernment

PI1 Ni[oku 84%

PI2 Wakachiku 78%

PI3 Raito 73%

PI4 Toyo 60%

PI5 Daiho 52%

PI6 Tobishima 50%

22

0

0.1

0.2

0.3

0.4

0.5

0.6

PI1 PI2 PI3 PI4 PI5 PI6

GreatEastJapanEarthquake(March11,2011)Cumulativeexcessreturns,March14-15

23

0

0.02

0.04

0.06

0.08

0.1

0.12


SasakoTunnelCollapses(Dec2,2012)Cumulativeexcessreturns,Dec3-5

24

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35


IOCGivestheOlympicsGamestoTokyo(Sept7,2013)Cumulativeexcessreturns,Sept9-11

PotenNalpiqallsofrelayingexclusivelyonthose“PIguys”

25

PublicInvestmentshocks

PIguys PrivateBusiness’sConstrucNonDemand

Shocks

LandPriceShocksBankLendingShocks

Eventhisindicatoriscontaminated!Howdowe“purify”?

Otherproblems

•  The“PIguys”tendtobesmall.– MorevolaNle(idiosyncraNccomponentsbig).– MaynotrepresenttheenNreaspectsofPublicInvestment.

– Fewfirmsincluded.

26

3.IdeasbehindtheNewIndicator(MarkIII)

27

Howto“purify”:uNlizeinfoonotherformsinthesameindustry

28

PublicInvestmentshocksPI’s

PrivateBusiness’sConstrucNonDemandShocks,

LandPriceShocks,BankLendingShocks

HousingDemandShocks

PlantBuilders(PB’s)

HomeBuilders(HB’s)

GeneralContractors(GC’s)

PlantDemandShocks

BasicIdea

•  Lookforfactorsthatare…– HighlycorrelatedwithPI’s– LesscorrelatedwithGC’s– NotverycorrelatedwithHB’s– NotmuchcorrelatedwithPB’s

•  UNlizeFactorAnalysisandFactorRotaPons!

29

Thus,thispaper’sdatasetincludesthefollowingbigfirms:

Nicknames Standsfor… CompanyPB1 PlantBuilder1 NikkiPB2 PlantBuilder2 ChiyodaKakoHB1 HomeBuilder1 DaiwaHouseHB2 HomeBuilder2 SekisuiHouseGC1 GeneralContractor1 ObayashiGC2 GeneralContractor2 TaiseiGC3 GeneralContractor3 KajimaGC4 GeneralContractor4 Shimizu

30

RefertoAppendixBforindividualreturnsgraphs.

31

0

0.1

0.2

0.3

0.4

0.5

0.6

PB1 PB2 HB1 HB2 GC1 GC2 GC3 GC4 PI1 PI2 PI3 PI4 PI5 PI6

GreatEastJapanEarthquake(March11,2011)Cumulativeexcessreturns,March14-15

32

0

0.02

0.04

0.06

0.08

0.1

0.12


SasakoTunnelCollapses(Dec2,2012)Cumulativeexcessreturns,Dec3-5

33

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35


IOCGivestheOlympicsGamestoTokyo(Sept7,2013)Cumulativeexcessreturns,Sept9-11

4.FactorAnalysisofthe14ConstrucNonCompanies

34

#offactors=4

35

01

23

Eig

enva

lues

0 5 10 15Number

Scree plot of eigenvalues after factor

FactorLoadings,beforerotaNon

36

Variable Factor1 Factor2 Factor3 Factor4 UniquenessPB1 0.19 0.08 0.19 0.33 0.81

PB2 0.25 0.06 0.14 0.37 0.78

HB1 0.37 -0.23 0.35 -0.12 0.67

HB2 0.32 -0.21 0.37 -0.15 0.70

GC1 0.60 -0.28 -0.10 0.01 0.55

GC2 0.65 -0.20 -0.11 0.04 0.52

GC3 0.64 -0.27 -0.15 0.02 0.50

GC4 0.63 -0.28 -0.16 0.03 0.50

PI1 0.36 0.31 -0.01 -0.07 0.77

PI2 0.49 0.39 0.01 -0.07 0.61

PI3 0.37 0.15 0.03 -0.08 0.83

PI4 0.52 0.37 0.02 -0.03 0.59

PI5 0.43 0.29 -0.04 -0.08 0.72

PI6 0.41 0.24 0.00 0.04 0.77

VarimaxRotaNon

37

Variable Factor1 Factor2 Factor3 Factor4PB1 0.03 0.09 0.06 0.42

PB2 0.11 0.11 0.03 0.44

HB1 0.21 0.07 0.52 0.08

HB2 0.16 0.07 0.52 0.05

GC1 0.61 0.16 0.19 0.07

GC2 0.61 0.25 0.16 0.12

GC3 0.66 0.19 0.15 0.07

GC4 0.66 0.18 0.14 0.08

PI1 0.08 0.47 0.03 0.05

PI2 0.10 0.60 0.06 0.09

PI3 0.15 0.36 0.12 0.04

PI4 0.14 0.61 0.06 0.13

PI5 0.15 0.51 0.03 0.04

PI6 0.15 0.43 0.03 0.16

QuarNmaxRotaNon

38

Variable Factor1 Factor2 Factor3 Factor4PB1 0.13 0.03 0.06 0.41

PB2 0.15 0.11 0.01 0.43

HB1 0.12 0.25 0.50 0.07

HB2 0.10 0.19 0.50 0.04

GC1 0.22 0.62 0.14 0.04

GC2 0.31 0.60 0.10 0.08

GC3 0.25 0.66 0.09 0.04

GC4 0.24 0.66 0.08 0.04

PI1 0.48 0.04 0.00 0.01

PI2 0.62 0.07 0.02 0.04

PI3 0.38 0.13 0.09 0.01

PI4 0.62 0.10 0.03 0.08

PI5 0.52 0.11 0.00 0.00

PI6 0.45 0.12 0.00 0.12

TargetFactorLoadingsMatrixinTargetRotaNon

39

Variable Factor1 Factor2 Factor3 Factor4PB1 1 0 0 1

PB2 1 0 0 1

HB1 1 0 1 0

HB2 1 0 1 0

GC1 1 0.5 1 0

GC2 1 0.5 1 0

GC3 1 0.5 1 0

GC4 1 0.5 1 0

PI1 1 1 0 0

PI2 1 1 0 0

PI3 1 1 0 0

PI4 1 1 0 0

PI5 1 1 0 0

PI6 1 1 0 0

TargetRotaNon

40

Variable Factor1 Factor2 Factor3 Factor4PB1 0.28 -0.03 -0.05 0.32

PB2 0.36 -0.05 -0.04 0.28

HB1 0.14 0.14 0.50 0.21

HB2 0.08 0.15 0.48 0.21

GC1 0.51 0.06 0.40 -0.15

GC2 0.57 0.11 0.35 -0.13

GC3 0.56 0.06 0.39 -0.19

GC4 0.56 0.04 0.38 -0.20

PI1 0.27 0.39 -0.06 0.01

PI2 0.36 0.51 -0.06 0.04

PI3 0.25 0.31 0.08 0.01

PI4 0.41 0.49 -0.04 0.06

PI5 0.33 0.42 -0.03 -0.03

PI6 0.36 0.31 -0.03 0.05

Results,NmeseriesplotofFactor

41

-.20

.2.4

.6ya

vg4

01jan1990 01jan1995 01jan2000 01jan2005 01jan2010 01jan2015ymd

-50

510

15

Sco

res

for f

acto

r 2


Simpleaveragesof

PI’s

TargetRotaNonFactor2

-2-1.5

-1-.5

0.5

yavg4sum


-60

-40

-20

020

yt2sum


Results,cumulaNve

42

Simpleaveragesof

PI’s

TargetRotaNonFactor2

5.PublicInvestmentNewsIndicator,MarkIII

43

NewsIndicator

•  Pickupthevaluesofthefactoronthedatesofthenews.

44

-.20

.2.4

.6navg4


-50

510

15nt2


PINewsIndicators,daily

45

BasedonSimpleavg’s

ofPI’s

BasedonTRFactor2

-.10

.1.2

.3.4

(sum

) nav

g4

1990m1 1995m1 2000m1 2005m1 2010m1 2015m1dm

-50

510

15

(sum

) nt2

1990m1 1995m1 2000m1 2005m1 2010m1 2015m1dm

PINewsIndicators,monthly

46


ofPI’s

BasedonTRFactor2

-.10

.1.2

.3.4

1990q1 1995q1 2000q1 2005q1 2010q1 2015q1

-50

510

15

1990q1 1995q1 2000q1 2005q1 2010q1 2015q1

PINewsIndicators,quarterly

47


ofPI’s

BasedonTRFactor2

6.VARanalysis

48

VARwithQuarterlydata,5variables

•  OurPInewsindicator(Quarterlyaggregated)•  ConstrucNonordersfromthepublicsector(top50companies)•  NominalPublicInvestment(SNA)•  PublicInvestmentDeflator(SNA)•  MacroVariable(GDPetc.)

•  Details–  AllinlogdifferencesexceptforFPnews.–  #oflags=4–  Choleskywiththeaboveordering.–  Dummiesforthe3majorearthquakes&ConsumpNontaxhike.

49

ResponsestoPublicInvestmentNewsShock

50

0

.05

.1

0 5 10 15 20

Response of BIG50

0

.02

.04

.06

0 5 10 15 20

Response of NOMINAL PUBLIC INVESTMENT

0

.005

.01

0 5 10 15 20

Response of PUBLIC INVESTMENT DEFLATOR

Responsesofmacrovariables

51

-.005

0

.005

.01

0 5 10 15 20

Response of NOMINAL GDP

0

.005

.01

0 5 10 15 20

Response of GDP DEFLATOR

-.005

0

.005

0 5 10 15 20

Response of REAL GDP

-.002

0

.002

.004

0 5 10 15 20

Response of REAL PRIVATE CONSUMPTION

7.Summaryandworkahead

52

•  Summary(1):ConstructedanewdailyindicatorofPInewsforJapan,takingadvantageofwithin-industryheterogeneityacrossfirms.

•  Summary(2):–  Thenewindicatorisnotmuchdifferentfromtheolderones.

–  ItisposiNvelyrelatedtofuturePI;hasposiNveeffectsonsomemacrovariables.

•  Whatneedstobedone:– MakethedateselecNonmoreobjecNve(mechanical).–  TakeintoaccountpossibiliNesofstructuralchangesorbreaks(non-Keynesianeffect?ZLB?Liquidityconstraints?)

53

THANKS!

54

AppendixA:ListofFPnewsdates

55

ListofFPevents

1.  ExtensionoftheFukuda-YamadalistofEmergencySNmulusMeasuresbeyond2010.

2.  ReconstrucNonBudgetawertheGreatEastJapanEarthquake.

3.  ImportantNaNonalElecNons.

4.  NaturalDisasters(threeearthquakesandatunnelcollapse).

5.  FutureSportsEvents(Nagano,World-cup,Tokyo)

6.  “NegaNve”FiscalEvents(Hashimotoreform,Koizumireform,“Shiwake”).

56

Alltogether…

•  IdenNfied38FPevents;159dates.

•  Generate159dummiescorrespondingtoeachofthosedates.

•  “Small”comparedtothetotalsamplesize=5930.

57

Eventlist(1)EmergencysNmuluspackages

•  Fukuda&Yamada(JJIE,2011):15packagesintheperiod1990-2010–  92,93(×2),94,95,98(×2),99,00,08(×3),09(×2),10.–  Basedontheirnewspaperreadings,theyidenNfied63datesofFPchanges.

•  Weextendthelistbeyond2010.–  Nov.2012(5dates)[Noda]–  Jan.2013(“2ndarrow”,7dates)[Abe]–  Dec.2013(5dates)[Abe]–  BasedontheelectronicversionofNikkei.

58

Eventlist(2)ReconstrucNonbudget

•  Threesupplementarybudgets,FY2011(11dates)[Kan,Noda]

•  Long-termplan(July2011,3dates)[Kan]•  Majorexpansioninspending(Jan.2013,4dates)[Abe]

•  BasedontheelectronicversionofNikkei.

59

Eventlist(3)ImportantnaNonalelecNons

1.  LowerHouse,Aug.2009(DPwins,“fromdamstopeople”).

2.  UpperHouse,Jul.2010(DPloses)3.  LowerHouse,Dec.2012(Abe’sLDPwins)4.  UpperHouse,Jul.2013(LDPwins)•  Dummiesfortwodaysbefore+twodaysawertheelecNon.

•  Noda’sdeclaraNontoresolvetheLowerHouse,Nov.2012(+twodaysthatfollowed).

60

Eventlist(4)Naturaldisasters

1.  Hanshin-Awaji,Jan.1995.2.  Chuetsu,Oct.2004.3.  GreatEastJapan,Mar.2011.•  Dummiesforthedayofthedisaster+3daysthat

followed.•  AddiNonaldummiesfordatesofpublicaNonofofficial

damageassessments(for1and3above).4.  Sasakotunnelcollapses,Dec.2012.•  Dummiesforthedayofthedisaster+2daysthatfollowed.

61

Eventlist(5)Newsaboutmajorsportsevents

•  NaganoOlympics,Jun.1991.•  FIFAWorldCupKorea-Japan,Jun.1996.•  TokyoOlympics,Sep.2013.

•  Dummiesfor3daysfollowingthenews.

62

Eventlist(6)“NegaNve”fiscalevents

•  Hashimotoreform,1996(3dates).•  Koizumireform,2001(3dates).•  DP“Shiwake”,2009(18dates).

•  BasedontheNikkeiTelecom.

63

AppendixB:Individualstockreturns(cumulaNve)

64

65

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

PB1

PB2

HB1

HB2

66

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

GC1

GC2

GC3

GC4

67

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

PI1

PI2

PI3

68

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

PI4

PI5

PI6

Documents

A New Daily Indicator for Fiscal News in Japan · 2016-03-20 · A New Daily Indicator for Fiscal News in Japan Etsuro Shioji (Hitotsubashi) (Hiroshi Morita (JSPS) to be added as