Speculative Behavior in the Stock Markets: Evidence from the United States and Japan

There have been enormous differences of opinion between U.S. and Japanese institutional investors about the outlook for stock prices, differences across the two countries in average one-year-ahead forecasts for the Japanese stock market as great as twenty percentage points. In the past two years most Japanese and U.S. institutional investors have had expectations for a reversal of trends in the stock market, and advised an investing strategy that depended on getting out of (or in to) the market before an anticipated market turnaround. These results, obtained from a number of questionnaire surveys in 1989 and 1990, help explain the relative lack of portfolio diversification across countries and show the short-term nature of speculative behavior.