64 Pages Posted: 14 Jul 2017
Date Written: December 18, 2014
We study worldwide market efficiency using the mispricing measure of Bartram and Grinblatt (2017). The measure estimates fair stock prices worldwide using quantitative analysis of point-in-time accounting data on more than 25,000 firms from 36 countries over two decades. Trading on deviations from fair value yields statistically and economically significant risk-adjusted returns in most regions, with the largest returns in the Asia Pacific and emerging markets countries. Buy-and-hold variations of the strategy are also profitable. We also verify that the mispricing measure does not proxy for known anomalies. The results suggest that global equity markets are not efficient, but are relatively more efficient in developed financial markets, except for Japan, and that the degree of inefficiency is tied to quantifiable market frictions that deter arbitrage.
Keywords: International finance, valuation, asset pricing, market efficiency, fundamental analysis, Point-in-Time, Theil-Sen
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation
Bartram, Söhnke M. and Grinblatt, Mark, Global Market Inefficiencies (December 18, 2014). Available at SSRN: https://ssrn.com/abstract=3002573