The Development and Evolution of Mean-Variance Efficient Portfolios in Japan: 30 Years After

The early 1990s was a period of expanding interest in Japanese financial research. The Japanese stock market volatility of the past 20 years of Japanese stocks was pronounced. Financial anomalies had emerged in the investment literature. Researchers were reporting evidence of statistically significant stock selection models that used a regression-weighted composite model to identify undervalued stocks in both Japan and US stock markets. We report factor backtesting results and robust regression modeling in creating optimized Japanese portfolio results for the 1997-2022 period. Our results suggest that stock selection models have been effectively employed to deliver excess returns. Similar value strategies in Japan have fared better than those in the US in recent periods.