...And Nothing Else Matters? On the Dimensionality and Predictability of International Stock Returns
44 Pages Posted: 3 Oct 2016 Last revised: 21 Nov 2018
Date Written: November 20, 2018
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: Suggested Citation