56 Pages Posted: 13 May 2010 Last revised: 7 Oct 2012
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: Suggested Citation
de Groot, Wilma and Pang, Juan and Swinkels, Laurentius (Laurens) Adrianus Petrus, 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: https://ssrn.com/abstract=1600023 or http://dx.doi.org/10.2139/ssrn.1600023