Size, Value, Profitability, and Investment Effects in International Stock Returns: Are They Really There?

Journal of Investing, Forthcoming

36 Pages Posted: 25 May 2021

See all articles by Nusret Cakici

Nusret Cakici

Fordham University

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business

Date Written: May 20, 2021

Abstract

Using data on 65,000 stocks from 23 countries, the authors re-evaluate the performance of the Fama-French (2015) factors in global markets. The results provide convincing evidence that the value, profitability, and investment factors are far less reliable than commonly thought. Their performance depends strongly on the geographical region and period examined. Furthermore, most factor returns are driven by the smallest firms. Virtually no value or investment effects are present among the big firms representing most of the total market capitalization worldwide. Given that the smallest firms are typically not investable by major financial institutions, these findings cast doubt on the five-factor model’s applicability in international markets.

Keywords: Five-Factor Model, Size, Value, Profitability, Investment, Asset Pricing, International Stock Markets, Small-Minus-Big (SMB), High-Minus-Low (HML), Robust-Minus-Weak (RMW), Conservative-Minus-Aggressive (CMA)

JEL Classification: C89, G12, G15

Suggested Citation

Cakici, Nusret and Zaremba, Adam, Size, Value, Profitability, and Investment Effects in International Stock Returns: Are They Really There? (May 20, 2021). Journal of Investing, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3849983 or http://dx.doi.org/10.2139/ssrn.3849983

Nusret Cakici

Fordham University ( email )

Fordham University
Graduate School of Business
New York, NY 10023
United States
2126366776 (Phone)

Adam Zaremba (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000
France

Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

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