Investor behavior in the october 1987 stock market crash: The case of Japan

Abstract

In a questionnaire survey we asked Japanese institutional investors to recall what they thought and did during the worldwide stock market crash in October 1987. The results confirm that the drop in U.S. stock prices was the primary factor on their minds, and other news stories in the United States dominated Japanese news stories. A comparison with an earlier survey of U.S. institutional investors at the time of the crash (R. J. Shiller, 1987, “Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence,” NBER Working Paper 2446, Nov.) shows a remarkable similarity between Japanese and U.S. institutional investors in a number of attitudinal and behavioral dimensions. The results suggest that events in the United States were the proximate cause of the crash in Japan, but that the transmission mechanism of the crash was very similar in both countries. J. Japan Int. Econ. March 1991, 5(1), pp. 1–13. Cowles Foundation, Yale University, P.O. Box 2125 Yale Station, New Haven, Connecticut 06520-2125; Japan Securities Research Institute, 1-5-8, Nihonbashi, Kayabacho, Chuo-ku, Tokyo 103, Japan; and Department of Economics, Nagoya City University, Mizuho-cho, Mizuho-ku, Nagoya 467, Japan.