The Volatility Effect in Emerging Markets

Emerging Markets Review, Vol. 16, pp. 31-45, 2013

Posted: 14 Apr 2013 Last revised: 21 Jun 2013

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Juan Pang

APG asset Management

Pim van Vliet

Robeco Quantitative Investments

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Date Written: April 12, 2013

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 12, 2013). Emerging Markets Review, Vol. 16, pp. 31-45, 2013. Available at SSRN: https://ssrn.com/abstract=2249660

David Blitz (Contact Author)

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Juan Pang

APG asset Management ( email )

Gustav Mahlerplein 3
Amsterdam, 1082 MS
Netherlands

Pim Van Vliet

Robeco Quantitative Investments ( email )

Rotterdam, 3011 AG
Netherlands

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