Robustness of Size and Value Effects in Emerging Equity Markets, 1985-2000

Abstract

We examine the robustness of size and book-to-market effects in 35 emerging equity markets during 1985-2000. Book-to-market effects are significant and are robust to tests accounting for non-normality and for firm size effects, and they do not depend on extreme returns. Size effects are also present but do not have the robustness found for book-to-market results. Book-to-market effects are found within size portfolios, but size effects are not found within book-to-market portfolios. Significant size results are produced by extreme returns. Moreover, size effects are found when size is measured relative to the local market but not in tests using absolute firm size. Cross-sectional regressions controlling for global and local systematic risk confirm the findings.

Keywords: Asset pricing anomalies, book-to-market effect, size effect, emerging markets, international financial markets

JEL Classification: G12, G14, G15