Predicting Equity Returns in Emerging Markets

41 Pages Posted: 4 Aug 2018 Last revised: 3 Jun 2019

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 a large set of firm-specific attributes and future equity returns for a sample of stocks from 23 emerging markets. Country-specific univariate analyses based on equal-weighted portfolio returns reveal strong evidence of short- and medium-term return continuations. We also find some evidence that market beta, book-to-market ratio and downside risk metrics can 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 either disappear or switch signs in a multivariate setting. We conclude that the most robust cross-sectional effects for emerging market equities are short- and medium-term return momentum.

Keywords: Equity Risk, Tail Risk, 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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