This is the first draft of a working paper led by two respected Japanese academicians who used governance and firm-specific big data to predict future equity returns in Japan . Conclusion: “we constructed a prediction model of firms’ future TSR and used it to show that the investment strategy based on the model’s predictions could generate non-negligible improvement in returns. These results suggest that high-dimensional corporate governance variables contain informative signals associated with future firm performance over and above reliance on purely financial data.”
The research was conducted using BDTI’s detailed, Japan-specific time-series database for all listed companies in Japan. The results are consistent with the fact that every fund manager that has backtested our data so far has bought a license, and every licensee has renewed so far. It would seem that Japan’s square peg of three different governance structures and peculiar practices does not seem to fit into the standard “global” round hole framework used by other data providers.