  This study explores the time-varying structure of market efficiency in the
prewar and wartime Japanese stock market using a new market
capitalization-weighted stock price index, the equity performance index. We
examine whether the adaptive market hypothesis (AMH) is supported in that era.
First, we find that the degree of market efficiency in the prewar and wartime
Japanese stock market varies over time and with major historical events. This
implies that the AMH is supported in this market. Second, we find that the
variation in market efficiency observed in this study is significantly
different from that in previous studies because of whether the price index is
capitalization weighted. Finally, as government intervention in the market
intensified throughout the 1930s, market efficiency declined as the war risk
premium rose, especially from the time when the Pacific War became inevitable.
