|||**ussbt**|**uslbt**|**usst**|**usroet**|**ustbillt**<br>|**uspet**<br>**Table III**|**usspreadt**<br>**. VAR Estim**|**jpsbt**<br>**ation**|**jplbt**|**jpst**|**jproet**|**jptbillt**|**jppet**|**jpspread**|**t**<br>**rert**|**R**<sup>**2**</sup>|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|**US Short-term Bond**|**ussbt+1**|0.43|-1.11|0.01|0.81|1.58|0.00|1.71|-0.59|0.92|0.00|-0.32|-0.13|0.00|-0.46|-0.02|0.37|
|||[0.30]|[0.42]|[0.01]|[0.22]|[0.29]|[0.00]|[0.49]|[0.36]|[0.44]|[0.01]|[0.20]|[0.23]|[0.00]|[0.36]|[0.01]|[0.00]|
|**US Long-term Bond**|**uslbt+1**|0.19|-0.73|0.01|0.67|1.36|0.00|2.13|-0.73|1.41|0.00|-0.64|-0.37|0.00|-0.88|-0.01|0.50|
|||[0.28]|[0.40]|[0.01]|[0.21]|[0.28]|[0.00]|[0.47]|[0.35]|[0.42]|[0.01]|[0.20]|[0.22]|[0.00]|[0.35]|[0.01]|[0.00]|
|**US Stock**|**usst+1**|-7.72|9.61|0.04|-1.56|-3.23|-0.02|-10.70|1.52|4.18|-0.12|-4.80|-6.30|0.00|-7.24|-0.07|0.17|
|||[3.59]|[5.13]|[0.08]|[2.77]|[3.60]|[0.01]|[6.02]|[4.46]|[5.47]|[0.07]|[2.52]|[2.81]|[0.00]|[4.46]|[0.10]|[0.01]|
|**US ROE**|**usroet+1**|0.14|-1.68|0.00|1.65|1.42|0.00|2.23|-0.91|1.73|0.00|-0.79|-0.51|0.00|-1.09|-0.01|0.65|
|||[0.30]|[0.43]|[0.01]|[0.23]|[0.30]|[0.00]|[0.51]|[0.37]|[0.46]|[0.01]|[0.21]|[0.24]|[0.00]|[0.37]|[0.01]|[0.00]|
|**US T-Bill Yield**|**ustbillt+1**|0.09|-0.15|0.00|0.08|0.89|0.00|0.21|0.17|-0.47|0.00|0.31|0.22|0.00|0.42|0.00|0.90|
|||[0.11]|[0.15]|[0.00]|[0.082]|[0.11]|[0.00]|[0.18]|[0.13]|[0.16]|[0.00]|[0.07]|[0.08]|[0.00]|[0.13]|[0.00]|[0.00]|
|**US P/E Ratio**|**uspet+1**|-15.58|51.84|0.12|-34.14|-53.38|0.84|-83.73|11.52|33.85|-0.68|-39.49|-46.94|-0.01|-70.38|-0.07|0.93|
|||[23.66]|[33.78]|[0.51]|[18.24]|[23.70]|[0.04]|[39.69]|[29.37]|[36.02]|[0.47]|[16.60]|[18.53]|[0.01]|[29.39]|[29.39]|[0.00]|
|**US Spread**|**usspreadt+1**|0.01|0.18|0.00|-0.18|-0.11|0.00|0.58|-0.07|0.31|0.00|-0.25|-0.18|0.00|-0.33|0.00|0.71|
|||[0.08]|[0.12]|[0.00]|[0.06]|[0.08]|[0.00]|[0.14]|[0.10]|[0.13]|[0.00]|[0.06]|[0.07]|[0.00]|[0.10]|[0.00]|[0.00]|
|**JP Short-term Bond**|**jpsbt+1**|-0.57|1.37|-0.01|-0.42|-0.04|0.00|-1.05|-1.35|2.63|0.00|-1.26|-1.28|0.00|-2.27|-0.02|0.29|
|||[0.45]|[0.64]|[0.01]|[0.35]|[0.45]|[0.00]|[0.76]|[0.56]|[0.69]|[0.01]|[0.32]|[0.35]|[0.00]|[0.56]|[0.01]|[0.00]|
|**JP**<br>**-term**<br>**Bond**<br>**Long**|**t+1**<br>**jplb**|-0.63|1.57|-0.01|-0.52|-0.21|0.00|-1.25|-2.01|3.26|0.01|-1.23|-1.23|0.00|-2<br>.11|-0<br>.02|0.<br>33|
|||[0.45]|[0.65]|[0.01]|[0.35]|[0.45]|[0.00]|[0.76]|[0.56]|[0.69]|[0.01]|[0.32]|[0.36]|[0.00]|[0.56]|[0.01]|[0.00]|
|**JP Stock**|**jpst+1**|0.45|4.71|0.27|-3.92|-6.02|-0.01|-5.91|-1.19|2.77|0.29|-0.74|-4.52|0.00|-4.23|-0.10|0.27|
|||[3.52]|[5.03]|[0.08]|[2.72]|[3.53]|[0.01]|[5.91]|[4.37]|[5.36]|[0.07]|[2.47]|[2.76]|[0.00]|[4.37]|[0.10]|[0.00]|
|**JP ROE**|**jproet+1**|-0.68|1.45|-0.01|-0.39|0.02|0.00|-1.05|-2.29|2.78|0.01|-0.46|-1.49|0.00|-2.44|-0.03|0.42|
|||[0.46]|[0.66]|[0.01]|[0.35]|[0.46]|[0.00]|[0.77]|[0.57]|[0.70]|[0.01]|[0.32]|[0.36]|[0.00]|[0.57]|[0.01]|[0.00]|
|**JP T-Bill Yield**|**jptbillt+1**|0.04|-0.06|0.00|0.02|0.01|0.00|0.02|-0.07|-0.07|0.00|0.13|1.09|0.00|0.13|0.00|0.98|
|||[0.04]|[0.06]|[0.00]|[0.03]|[0.04]|[0.00]|[0.07]|[0.05]|[0.06]|[0.00]|[0.03]|[0.03]|[0.00]|[0.05]|[0.00]|[0.00]|
|**JP P/E Ratio**|**jppet+1**|90.59|-13.02|1.82|-72.43|-78.65|-0.15|-9.49|-78.49|229.13|1.31|-143.27|-181.45|0.89|-236.42|-3.91|0.94|
|||[70.42]|[100.56]|[1.50]|[54.30]|[70.55]|[0.11]|[118.18]|[87.45]|[107.25]|[1.39]|[49.43]|[55.17]|[0.03]|[87.49]|[2.02]|[0.00]|
|**JP Spread**|**jpspreadt+1**|-0.05|0.20|0.00|-0.11|-0.19|0.00|-0.23|0.20|-0.26|0.00|0.06|0.08|0.00|1.08|0.00|0.88|
|||[0.06]|[0.09]|[0.00]|[0.05]|[0.06]|[0.00]|[0.10]|[0.08]|[0.09]|[0.00]|[0.04]|[0.05]|[0.00]|[0.08]|[0.00]|[0.00]|
|**Real Exchange Rate**|**rert+1**|0.53|1.94|-0.03|-1.24|-1.87|-0.01|-6.75|0.74|-0.75|0.01|0.01|-2.78|0.00|0.41|0.02|0.12|
|<br>This table shows the r<br>government bonds, sto<br>squared for each equati|esults of our VA<br>cks, and ROE. O<br>on (with p-values|[2.67]<br>R estimati<br>ther state <br>of the F-t|[3.81]<br>on with log<br>variables in<br>est of joint s|[0.06]<br> real asset <br>clude: T-Bi<br>ignificanc|[2.06]<br> returns on <br>ll nominal <br>e in bracket|[2.67]<br> a quarterly <br> yields, pric<br>s)._t-statisti_|[0.00]<br> basis from<br>e-earnings <br>_cs_for coeff|[4.47]<br>1960 to 2005<br>ratios, term spr<br>icient estimate|[3.31]<br>. The follo<br>eads, and t<br>s are shown|[4.06]<br>wing asset r<br>he real exch<br>in brackets|[0.05]<br>eturns are <br>ange rate. <br>.|[1.87]<br> included in<br> Each row c|[2.09]<br> the estima<br>orresponds|[0.00]<br>tion: short<br> to one eq|[3.31]<br>-term governm<br>uation. The ta|[0.08]<br>ent bonds<br>ble also sh|[0.05]<br>, long-term<br>ows the R-|