Which factors explain African stock returns?

Mohamed Lamine Mbengue, Bara Ndiaye and Oumar Sy

Finance Research Letters, 2023, vol. 54, issue C

Abstract: We use returns across 13 African stock markets to perform factor-spanning tests. Contradicting US-based results, HML is not redundant in the five-factor model, UMD generates a reliable alpha in the Q-based regression, and the mispricing-purged SMB does not consistently dominate the other SMB factors. Because they cannot explain HML and UMD, the Q and Q5 models do not subsume the five- and six-factor models. Since none of the other models captures the ROE factor, the Q-factor model is never subsumed. The Q model spans the Q5 model because the expected growth factor rEG is not priced in African markets.

Keywords: Asset-pricing models; Factor-spanning tests; African stock markets (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001782

DOI: 10.1016/j.frl.2023.103805

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