Risk-based explanation for the country-level size and value effects

Adam Zaremba ()

Finance Research Letters, 2016, vol. 18, issue C, 226-233

Abstract: The present study provides a risk-based explanation for the country-level size and value effects. The research demonstrates that the small-country effect is fully explained by cross-sectional variation in the country risk. Furthermore, accounting for the country risk decreases the alphas on value strategies by approximately 30%, making them statistically insignificant. The results are robust to the affect of taxes on dividends, alternative risk measures, and changes in sorting variables used to implement the strategies examined. The phenomenon is particularly pronounced in emerging markets.

Keywords: Value premium; Size premium; Small-market effect; Country selection strategies; Country-level anomalies; International asset pricing; Pricing of risk; Country risk (search for similar items in EconPapers)
JEL-codes: F30 G12 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:18:y:2016:i:c:p:226-233

DOI: 10.1016/j.frl.2016.04.020

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