A Comprehensive Analysis of Time Series Segmentation on the Japanese Stock Prices

TL;DR

This paper analyzes Japanese stock prices from 2000 to 2012 using time series segmentation, revealing correlations between volatility patterns and macroeconomic events, including stability periods and societal turmoil impacts.

Contribution

It applies a recursive Gaussian mixture segmentation to Japanese stock data, linking volatility quintiles to macroeconomic conditions and societal events.

Findings

Major stability from 2004 to 2007

Increased instability after 2008

Steep rise in instability after 2011 earthquake

Abstract

This study conducts a comprehensive analysis of time series segmentation on the Japanese stock prices listed on the first section of the Tokyo Stock Exchange during the period from 4 January 2000 to 30 January 2012. A recursive segmentation procedure is used under the assumption of a Gaussian mixture. The daily number of each quintile of volatilities for all the segments is investigated empirically. It is found that from June 2004 to June 2007, a large majority of stocks are stable and that from 2008 several stocks showed instability. On March 2011, the daily number of instable securities steeply increased due to societal turmoil influenced by the East Japan Great Earthquake. It is concluded that the number of stocks included in each quintile of volatilities provides useful information on macroeconomic situations.