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The Volatility Effect in Emerging Markets

31 Pages Posted: 6 May 2012 Last revised: 18 Dec 2012

David Blitz

Robeco Asset Management - Quantitative Strategies

Juan Pang

Shell Asset Management Company

Pim van Vliet

Robeco Asset Management - Quantitative Strategies

Multiple version iconThere are 2 versions of this paper

Date Written: April 10, 2012

Abstract

We examine the empirical relation between risk and return in emerging equity markets and find that this relation is flat, or even negative. This is inconsistent with theoretical models such as the CAPM, which predict a positive relation, but consistent with the results of studies for developed equity markets. The volatility effect appears to be growing stronger over time, which we argue might be related to the increased delegated portfolio management in emerging markets. Finally, we find that the volatility effect in emerging markets is only weakly related to that in developed equity markets, which argues against a common-factor explanation.

Keywords: volatility effect, asset pricing, emerging markets, CAPM, alpha, low-volatility

JEL Classification: F20, G11, G12, G14, G15

Suggested Citation

Blitz, David and Pang, Juan and van Vliet, Pim, The Volatility Effect in Emerging Markets (April 10, 2012). Available at SSRN: https://ssrn.com/abstract=2050863 or http://dx.doi.org/10.2139/ssrn.2050863

David Blitz (Contact Author)

Robeco Asset Management - Quantitative Strategies ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Juan Pang

Shell Asset Management Company ( email )

Sir Winston Churchilllaan 366h
Rijswijk, 2285 SJ
Netherlands

Pim Van Vliet

Robeco Asset Management - Quantitative Strategies ( email )

Rotterdam, 3011 AG
Netherlands

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