Japanese Equities

CHAPTER 1Macro Indicators and Seasonality

If the equity market is a reflection of the economy, then what can tell us about the state of the economy? The answer lies in macro indicators. Here, we focus on those I believe to be the most effective when used with the Japanese equity market, the OECD CLI and Economy Watchers' DI, and those perhaps less effective but nevertheless important, ISMPMI and seasonality.

OECD CLI

OECD CLI stands for Organization of Economic Co‐operation and Development Composite Leading Indicators, which are the series of macroeconomic indicators released monthly by the OECD. Since an in‐depth explanation of how these indicators are constructed and calculated is beyond the scope of this book, interested readers should refer to the relevant section on the OECD homepage (http://www.oecd.org/sdd/leading‐indicators/).

The OECD CLIs were originally developed by the OECD to forecast the peaks and valleys of the economy. The history of CLIs goes back to the 1960s, and throughout the years since, the OECD has endeavored to examine and improve the accuracy of these indicators. At present, CLIs are published for each of the OECD member countries, as well as for larger economic regions.

More concretely, the CLIs result from the collection of economic data released by the member nations, and thus, the figures calculated monthly are released about a month and ten days after the fact (e.g., a January number is usually released around March 10). We may wonder how effective ...