Extreme Bound Analysis of Emerging Market Stock Market Anomalies: Nothing is Robust
"Extreme Bound Analysis of Emerging Stock Market Anomalies", The Journal of Portfolio Management Winter 2000, 26 (2) 95-103; DOI: https://doi.org/10.3905/jpm.2000.319749
Posted: 19 Jun 2019
Date Written: 2000
Studies of emerging stock market anomalies are based on underspecified models. Extreme bound analysis (EBA), a technique to remedy specification bias, indicates that no anomaly is robust, given panel data covering sixteen countries from March 1988 through January 1995. Only under a relaxed decision rule does the author find that five of the fifteen factors studied are sturdy: price/book long-run lagged returns, population demographics, country risk, and relative market size. What is more sobering, time series EBA produces no sturdy aggregate determinants.
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