...And Nothing Else Matters? On the Dimensionality and Predictability of International Stock Returns

44 Pages Posted: 3 Oct 2016 Last revised: 21 Nov 2018

See all articles by Heiko Jacobs

Heiko Jacobs

University of Duisburg-Essen, Campus Essen

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management

Date Written: November 20, 2018

Abstract

We explore the dimensionality of stock returns in North America, Europe, Japan, Pacific, and Emerging Markets on the basis of 240 cross-sectional predictors. Our approach allows us to identify those predictors that are most consistently related to nonmicro-cap stock returns (i.e., independent of other predictors, adjusted for data mining, existent in different time periods, and across regions). There is a large geographic heterogeneity in the significance of individual characteristics and in time trends, which leads to substantial out-of-sample diversification gains for global multidimensional hedge portfolios. Our results are most consistent with the mispricing hypothesis for anomalies.

Keywords: Anomalies, international stock markets, multidimensionality, market efficiency, return predictability

JEL Classification: G11, G12, G14

Suggested Citation

Jacobs, Heiko and Müller, Sebastian, ...And Nothing Else Matters? On the Dimensionality and Predictability of International Stock Returns (November 20, 2018). Available at SSRN: https://ssrn.com/abstract=2845306 or http://dx.doi.org/10.2139/ssrn.2845306

Heiko Jacobs

University of Duisburg-Essen, Campus Essen ( email )

Universitätsstr. 9
Essen, 45141
Germany
+49-(0)621-181-3453 (Phone)
+49-(0)621-181-1534 (Fax)

HOME PAGE: http://sites.google.com/site/heikojacobsfinance/

Sebastian Müller (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Germany

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