Country Value Premiums and Financial Crises
International Journal of Finance & Banking Studies, Vol.3 No.1, pp. 12-50, 2014
Posted: 6 Jan 2014 Last revised: 10 May 2016
Date Written: January 5, 2014
The paper concentrates on the value premium across countries and contributes to the nvestment and asset pricing literature in three ways. First, I provide fresh evidence that the high-value countries perform significantly better than the low-value countries. Additionally, this phenomenon is indifferent to the choice of the computational currency, representative index or value indicator. Second, I demonstrate that the value effect can be successfully amplified by combining with country-level size and momentum effects. Third, I show that returns to the high-value countries deteriorate in financial crisis conditions, because the country-level value premium is negatively correlated with the credit spreads, TED spread and expected volatility. I examine data from 66 markets between years 2000 and 2013.
Keywords: inter-country variation in stock returns, value premium, financial crisis
JEL Classification: G11, G12, G14, G15
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