Does U.S. Academic Research Destroy the Predictability of Global Stock Returns?

Abstract

We examine the out-of-sample and post-publication return predictability of 87 factors published in U.S. journals across global stock markets encompassing 38 countries, focusing on their capacity to explain cross-sectional stock returns. Our results underscore a pronounced impact of U.S. academic publications on global markets, with portfolio returns being 65% and 73% lower out-of-sample and post-publication, respectively. These diminishing returns are consistently observed across both developed and developing markets. As the publication dates of these factors approach the present, the return-decline intrigued by U.S. academic research narrows. This result implies that global studies and investors are increasingly integrating insights from U.S. academic publications to rectify potential mispricing.

Keywords: Anomalies; Global stock markets; Publication effect; Mispricing

JEL Classification: G12, G14, G15