Return anomalies on the Nikkei: Are they statistical illusions?

This study investigates the sensitivity of the long-term return anomaly observed on the Nikkei stock index to sample and method bias using daily data from the period 3 January 1980 to 31 October 2000. Initially, the CUSUM statistic is employed to identify sub-periods of sign shifts in the mean returns. We find that the null hypothesis of no long-term dependence is accepted for the whole sample and every sub-period using the modified rescaled range test, but not using the classical rescaled adjusted range test. We conclude that researchers may inadvertently introduce sample and method bias into their studies of the time series properties of the Nikkei unless sample period and method are considered.