Explaining Equity Anomalies In Frontier Markets: A Horserace of Factor Pricing Models

Emerging Markets Finance and Trade, Forthcoming

51 Pages Posted: 28 May 2019

See all articles by Adam Zaremba

Adam Zaremba

Poznań University of Economics and Business; University of Dubai

Alina Maydybura

University of Dubai

Anna Czapkiewicz

AGH University of Science and Technology

Marina Arnaut

University of Dubai

Date Written: April 23, 2019

Abstract

We are the first to compare the explanatory power of the major empirical asset pricing models over equity anomalies in the frontier markets. We replicate over 160 stock market anomalies in 23 frontier countries for years 1996–2017, and evaluate their performance with the factor models. The Carhart’s (1997) four-factor model outperforms both the recent Fama and French (2015) five-factor model and the q-model by Hou, Xue, and Zhang (2015). Its superiority is driven by the ability to explain the momentum-related anomalies. Inclusion of additional profitability and investment factors lead to no further major improvement in the performance. Nonetheless, none of the models is able to fully explain the abnormal returns on all of the anomaly portfolios.

Keywords: equity anomalies, frontier stock markets, empirical asset pricing, factor models, the cross-section of returns

JEL Classification: G11, G12, G15

Suggested Citation

Zaremba, Adam and Maydybura, Alina and Czapkiewicz, Anna and Arnaut, Marina, Explaining Equity Anomalies In Frontier Markets: A Horserace of Factor Pricing Models (April 23, 2019). Emerging Markets Finance and Trade, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3378785

Adam Zaremba (Contact Author)

Poznań University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

University of Dubai ( email )

Academic City
Dubai, 14143
United Arab Emirates

HOME PAGE: http://adamzaremba.pl/

Alina Maydybura

University of Dubai ( email )

AL MAKTOOM STREET
Dubai, 14143
United Arab Emirates

Anna Czapkiewicz

AGH University of Science and Technology ( email )

30 Mickiewicza Av.
Kraków, 30-059
Poland

Marina Arnaut

University of Dubai ( email )

AL MAKTOOM STREET
Dubai, 14143
United Arab Emirates

HOME PAGE: http://https://ud.ac.ae/

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