The Drivers of Expected Returns in International Markets

Abstract:     
This paper examines a comprehensive list of 18 different risk factors that potentially impact international equity returns. These factors include systematic risk, idiosyncratic risk, size, semi-variance, downside betas, value-at-risk, skewness, coskewness, kurtosis, political risk and country risk. I investigate whether these risk factors explain the cross-section of average returns in 47 countries. I also analyze whether the same risk factors influence developed and emerging market returns. I find evidence that an asset pricing framework that incorporates skewness has success in explaining average returns.

Number of Pages in PDF File: 27

Keywords: Global risk factors, beta, cross-section of returns, systematic risk, idiosyncratic risk, size, semi-variance, downside betas, value-at-risk, skewness, coskewness, kurtosis, political risk, country risk

JEL Classification: G12, G15, F30

working papers series