The Cross-Section of Stock Returns in Frontier Emerging Markets

Wilma de Groot, Juan Pang and Laurens Swinkels

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: We are the first to investigate the cross-section of stock returns in the new emerging equity markets, the so-called frontier emerging markets. Our unique survivorship-bias free data set consists of more than 1,400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier emerging markets. The major benefit of using individual stock characteristics is that it allows us to investigate whether return factors that have been documented in developed countries also exist in these markets. We document the presence of economically and statistically significant value and momentum effects, and a local size effect. Our results indicate that the value and momentum effects still exist when incorporating conservative assumptions of transaction costs. Additionally, we show that value, momentum, and local size returns in frontier markets cannot be explained by global risk factors.

Keywords: alpha; behavioral finance; emerging markets; frontier markets; momentum effects; size effect; value effect (search for similar items in EconPapers)
JEL-codes: F21 F30 G11 G15 (search for similar items in EconPapers)
Date: 2012-08-01
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Citations: View citations in EconPapers (42)

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Journal Article: The cross-section of stock returns in frontier emerging markets (2012)
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