Abstract

http://ssrn.com/abstract=908345
 
 

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What Factors Drive Global Stock Returns?


Kewei Hou


Ohio State University (OSU) - Department of Finance

George Andrew Karolyi


Cornell University - Johnson Graduate School of Management

Bong-Chan Kho


Seoul National University, Business School

January 4, 2011

Charles A. Dice Center Working Paper No. 2006-009
Fisher College of Business Working Paper No. 2006-03-009

Abstract:     
Using monthly returns for over 27,000 stocks from 49 countries over a three-decade period, we show that a multifactor model that includes factor-mimicking portfolios based on momentum and cash flow-to-price captures significant time series variation in global stock returns, and has lower pricing errors and fewer model rejections than the global CAPM or a popular model that uses size and book-to-market factors. We find reliable evidence that the global cash flow-to-price factor is related to a covariance risk model. In contrast, we reject the covariance risk model in favor of a characteristic model for size and book-to-market factors.

Number of Pages in PDF File: 65

Keywords: International finance; asset pricing models; common factors

JEL Classification: F30, G14, G15

working papers series





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Date posted: June 15, 2006 ; Last revised: May 27, 2011

Suggested Citation

Hou, Kewei and Karolyi, George Andrew and Kho, Bong-Chan, What Factors Drive Global Stock Returns? (January 4, 2011). Charles A. Dice Center Working Paper No. 2006-009; Fisher College of Business Working Paper No. 2006-03-009. Available at SSRN: http://ssrn.com/abstract=908345 or http://dx.doi.org/10.2139/ssrn.908345

Contact Information

Kewei Hou
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-0552 (Phone)
614-292-2418 (Fax)

George Andrew Karolyi (Contact Author)
Cornell University - Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
Bong-Chan Kho
Seoul National University, Business School ( email )
607 LG Hall
599 Kwanak-ro, Kwanak-gu
Seoul, 151-916
Korea, Republic of (South Korea)
+82-2-880-8798 (Phone)
+82-2-876-8411 (Fax)
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