Global Market Inefficiencies

64 Pages Posted: 14 Jul 2017  

Söhnke M. Bartram

Warwick Business School - Department of Finance

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 18, 2014

Abstract

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

Bartram, Söhnke M. and Grinblatt, Mark, Global Market Inefficiencies (December 18, 2014). Available at SSRN: https://ssrn.com/abstract=3002573

Söhnke M. Bartram (Contact Author)

Warwick Business School - Department of Finance ( email )

Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)

HOME PAGE: http://go.warwick.ac.uk/sbartram/

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-1098 (Phone)
310-206-5455 (Fax)

Yale University - International Center for Finance

Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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