The cross-section of emerging market stock returns

Matthias X. Hanauer and Jochim G. Lauterbach

Emerging Markets Review, 2019, vol. 38, issue C, 265-286

Abstract: Using monthly stock returns from 28 emerging market countries and a total sample period of 21 years, we investigate the predictive power of a broad set of factors. We document that the factor definitions of the Fama and French (2015) five-factor model are less robust compared to alternative factor definitions. In contrast, the anomalous returns associated with cash flow-to-price, gross profitability, composite equity issuance, and momentum are pervasive as they show up in equal- and value-weighted portfolio sorts as well as in cross-sectional regressions. In contrast to financial theory and in line with previous findings, we do not find a positive cross-sectional relationship between risk and return. Finally, return forecasts derived from the alternative factor definitions are superior in their out-of-sample predictive ability to the ones derived from the five-factor model.

Keywords: Emerging markets; Anomalies; Value; Profitability; Investments; Momentum (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:38:y:2019:i:c:p:265-286

DOI: 10.1016/j.ememar.2018.11.009

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