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The Cross-Section of Stock Returns in Frontier Emerging Markets

56 Pages Posted: 13 May 2010 Last revised: 7 Oct 2012

Wilma de Groot

Robeco Asset Management

Juan Pang

Shell Asset Management Company

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Institutional Asset Management

Date Written: August 1, 2012


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.

Keywords: Alpha, Behavioral finance, Emerging markets, Frontier Markets, Momentum effect, Size effect, Value effect

JEL Classification: F21, F30, G11, G15

Suggested Citation

de Groot, Wilma and Pang, Juan and Swinkels, Laurens, The Cross-Section of Stock Returns in Frontier Emerging Markets (August 1, 2012). Journal of Empirical Finance, Vol. 19, Issue 5, pp. 796-818.. Available at SSRN: or

Wilma De Groot

Robeco Asset Management ( email )

Rotterdam, 3011 AG
+31 10 224 3107 (Phone)

Juan Pang

Shell Asset Management Company ( email )

Sir Winston Churchilllaan 366h
Rijswijk, 2285 SJ

Laurens Swinkels (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Robeco Institutional Asset Management ( email )

Rotterdam, 3000
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

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