Value, Size and Momentum Portfolios in Real Time: The Cross-Section of South African Stocks
affiliation not provided to SSRN
University of Cape Town; South African Reserve Bank
March 26, 2010
We implement a recursive out-of-sample method to examine anomalies-based ex-ante predictability in the cross-section of stock returns. We obtain a series of simulated out-of-sample returns, consistent with investors using only prior information when choosing predictor variables. We find that, by commonly used performance criteria, real-time trading strategies based on size, value and momentum effects would not consistently outperform a passive index of South African stocks - despite consistent in-sample excess returns. Our results suggest that the empirical relationship between the anomalous factors and cross-sectional average returns is unstable.
Number of Pages in PDF File: 24
Keywords: asset pricing anomalies, real-time predictability, long/short portfolios, emerging markets, South Africa
JEL Classification: G11, G12, G14, M41, C21working papers series
Date posted: March 31, 2010
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