Local, Regional, or Global Asset Pricing?

Journal of Financial and Quantitative Analysis (2022), Vol. 57(1), pp. 291-320

88 Pages Posted: 23 Sep 2020 Last revised: 1 Mar 2022

Date Written: August 10, 2020

Abstract

Analyzing several Developed and Emerging international markets, I test the ability of global, regional, and local models to explain a large set of 134 cross-sectional anomalies. My main finding is that both global and regional factor models create substantially larger average absolute alphas than local factor models. Annual (absolute) anomaly portfolio alphas are on average 1.7 and 1.1 percentage points higher, respectively, with global and regional than with local factor models. Even for the most recent period, there is no evidence of a catch-up of global and regional factor models. There is substantial potential for international diversification of anomaly strategies.

Keywords: International asset pricing, return anomalies, international diversification

JEL Classification: G15, G12, G11

Suggested Citation

Hollstein, Fabian, Local, Regional, or Global Asset Pricing? (August 10, 2020). Journal of Financial and Quantitative Analysis (2022), Vol. 57(1), pp. 291-320, Available at SSRN: https://ssrn.com/abstract=3670502

Fabian Hollstein (Contact Author)

Saarland University ( email )

Campus
Saarbrucken, Saarland D-66123
Germany

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