Predicting Equity Returns in Emerging Markets

50 Pages Posted: 4 Aug 2018 Last revised: 1 Sep 2020

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). 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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