The Cross-Section of Stock Returns in Frontier Emerging Markets
Wilma De Groot
Robeco Asset Management
Shell Asset Management Company
Erasmus University Rotterdam (EUR); Norges Bank Investment Management (NBIM)
August 1, 2012
Journal of Empirical Finance, Vol. 19, Issue 5, pp. 796-818.
We are the first to investigate the cross-section of stock returns in the new emerging equity markets, the so-called frontier emerging markets. Our unique survivorship-bias free data set consists of more than 1,400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier emerging markets. The major benefit of using individual stock characteristics is that it allows us to investigate whether return factors that have been documented in developed countries also exist in these markets. We document the presence of economically and statistically significant value and momentum effects, and a local size effect. Our results indicate that the value and momentum effects still exist when incorporating conservative assumptions of transaction costs. Additionally, we show that value, momentum, and local size returns in frontier markets cannot be explained by global risk factors.
Number of Pages in PDF File: 56
Keywords: Alpha, Behavioral finance, Emerging markets, Frontier Markets, Momentum effect, Size effect, Value effect
JEL Classification: F21, F30, G11, G15Accepted Paper Series
Date posted: May 13, 2010 ; Last revised: October 7, 2012
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