Predicting Equity Returns in Emerging Markets

Emerging Markets Finance and Trade, Vol. 57, No. 13, 2021

50 Pages Posted: 4 Aug 2018 Last revised: 23 Mar 2022

See all articles by Yigit Atilgan

Yigit Atilgan

Sabanci University

K. Ozgur Demirtas

Sabanci University Graduate School of Management

A. Doruk Gunaydin

Sabanci University

Date Written: July 31, 2018

Abstract

This study investigates the relation between firm-specific attributes and future equity returns in 23 emerging markets. Equal-weighted portfolio returns reveal strong evidence of short-term momentum (rather than reversal) and medium-term return momentum. We also find evidence that market beta, book-to-market ratio and downside risk metrics predict equity returns, however, these relations get weaker once value-weighting is used. In univariate regressions, smaller firms with higher idiosyncratic volatility, lottery-like characteristics and stock-specific downside risk are associated with higher future returns, however, these relations disappear in a multivariate setting. We conclude that the most robust cross-sectional effects are short- and medium-term return momentum.

Keywords: tail risk, momentum, anomalies, cross-section of equity returns, emerging markets

JEL Classification: G10, G11, G12

Suggested Citation

Atilgan, Yigit and Demirtas, K. Ozgur and Gunaydin, A. Doruk, Predicting Equity Returns in Emerging Markets (July 31, 2018). Emerging Markets Finance and Trade, Vol. 57, No. 13, 2021, Available at SSRN: https://ssrn.com/abstract=3225034 or http://dx.doi.org/10.2139/ssrn.3225034

Yigit Atilgan

Sabanci University ( email )

Orta Mahalle Üniversite Caddesi 27
Istanbul, Orhanli, 34956 Tuzla 34956
Turkey

K. Ozgur Demirtas (Contact Author)

Sabanci University Graduate School of Management ( email )

Sabanci University, School of Management
Orhanli Tuzla
Orhanlı-Tuzla, Istanbul, 34956
Turkey
(+90) 216-483-9985 (Phone)
(+90) 216-483-9699 (Fax)

A. Doruk Gunaydin

Sabanci University ( email )

School of Management
Orhanli Tuzla
İstanbul, 34956
Turkey

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