86 Pages Posted: 3 Oct 2016 Last revised: 23 Oct 2016
Date Written: October 20, 2016
We use the information contained in 161 cross-sectional trade signals to explore the multidimensionality and predictability of individual stock returns in five international markets (North America, Europe, Pacific, Japan, and Emerging Markets). All markets are highly dimensional, but the most important return predictors differ across regions. Exploiting these characteristics, a single globally diversified high-dimensioned long/short return forecast strategy realizes a monthly equal-weighted (value-weighted) four-factor alpha of 4.1% (1.9%), and an annualized Sharpe ratio of 7.9 (3.4). Collectively, these results add to our understanding of market integration, data mining, and the degree of informational efficiency of global stock markets.
Keywords: Anomalies, international stock markets, multidimensionality, market efficiency, return predictability
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation
Jacobs, Heiko and Müller, Sebastian, ...And Nothing Else Matters? On the Dimensionality and Predictability of International Stock Returns (October 20, 2016). Available at SSRN: https://ssrn.com/abstract=2845306 or http://dx.doi.org/10.2139/ssrn.2845306