The Cross Section of Country Equity Returns: A Review of Empirical Literature
50 Pages Posted: 19 Sep 2019
Date Written: September 10, 2019
The last three decades brought mounting evidence regarding the cross-sectional predictability of country equity returns. The studies not only documented country-level counterparts of well-established stock-level anomalies, such as size, value, or momentum, but also demonstrated some unique return-predicting signals such as fund flows or political regimes. Nonetheless, different studies vary remarkably in terms of their dataset and methods employed. This study aims to provide a comprehensive review of the current literature on the cross-section of country equity returns. We focus on three particular aspects of the asset pricing literature. First, we study the choice of dataset and sample preparation methods. Second, we survey different aspects of the methodological approaches. Last but not least, we review the country-level equity anomalies discovered so far. The discussed cross-sectional return patterns not only provide new insights into international asset pricing but can also be potentially translated into effective country allocation strategies.
Keywords: cross section of country equity returns, country-level stock market anomalies, empirical asset pricing, international equity markets, return predictability
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation