Size, Value, and Momentum in Emerging Market Stock Returns: Integrated or Segmented Pricing?

Asia-Pacific Journal of Financial Studies, Forthcoming

42 Pages Posted: 8 Nov 2013 Last revised: 18 Apr 2015

See all articles by Matthias X. Hanauer

Matthias X. Hanauer

Robeco Asset Management - Quantitative Strategies; Technische Universität München (TUM)

Martin Linhart

Technische Universität München (TUM)

Date Written: February 10, 2015

Abstract

In this paper, we examine size, value, and momentum patterns in the stock returns of four emerging market regions - Latin America, EMEA, Asia, and BRIC. We document a strong and highly significant value effect, and a strong but less significant momentum effect. Substantial value and momentum premiums are also present for big stocks and the overall premiums are not mainly driven by small stocks. Furthermore, the value patterns in emerging markets are more pronounced than in developed markets. In order to examine integrated global pricing across these regions, we test whether empirical asset pricing models with global factors explain the variation in average stock returns and, in particular, we assess their ability to capture the value and momentum patterns. Since the global models perform poorly for emerging markets, we examine the performance of local factor models, and find evidence in favor of the local four-factor model with local market, size, value, and momentum factors. On the basis of our results, pricing in emerging markets does not seem to be globally integrated.

Keywords: emerging markets, integrated pricing, momentum premium, size premium, value premium

JEL Classification: G12, G14, G15

Suggested Citation

Hanauer, Matthias Xaver and Linhart, Martin, Size, Value, and Momentum in Emerging Market Stock Returns: Integrated or Segmented Pricing? (February 10, 2015). Asia-Pacific Journal of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2351355 or http://dx.doi.org/10.2139/ssrn.2351355

Matthias Xaver Hanauer (Contact Author)

Robeco Asset Management - Quantitative Strategies ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

HOME PAGE: http://www.robeco.com/en/insights/authors/matthias-hanauer.html

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany

HOME PAGE: http://www.fm.wi.tum.de/?id=31

Martin Linhart

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, 80333
Germany

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