The nexus of anomalies-stock returns-asset pricing models: The international evidence

Rahul Roy () and Santhakumar Shijin

Borsa Istanbul Review, 2019, vol. 19, issue 1, 1-14

Abstract: We study the international stock returns across Europe, Asia Pacific, North America, US, Japan, Global, and Global excluding US. We find there are value premiums in average stock returns across the regions. There is momentum return in all the regions except for Japan. With the exception of Japan, profitability and investment premiums in average stock returns exist across the regions. Further, the value, momentum, and profitability premiums vary with the firm size and premiums decrease from smaller to bigger stocks excluding Japan. We examine whether empirical asset pricing models capture the value, momentum, profitability, and investment pattern in international average returns, and the integration of the asset prices across the regions. We reject the global integrated pricing approach. The performance of local Carhart four-factor model is relatively better than the variant models in approximating the returns on Japanese size-B/M and size-momentum portfolios. Similarly, the FF five-factor model performs better than the variant models in approximating the returns on Asia Pacific, North American, and Japanese size-profitability portfolios. In addition, FF five-factor model performs relatively better in approximating the returns on European and Japanese size-investment portfolios.

Keywords: Asset pricing model; GRS test; Integrated pricing; International stock returns; Returns predictability (search for similar items in EconPapers)
JEL-codes: C53 F36 G12 O57 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bor:bistre:v:19:y:2019:i:1:p:1-14

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