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

48 Pages Posted: 16 Jan 2024

See all articles by Guohao Tang

Guohao Tang

Hunan University - College of Finance and Statistics

Yuwei Xie

Hunan University - School of Finance and Statistics

Lin Zhu

Hunan University - School of Finance and Statistics

Date Written: November 24, 2023

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

Suggested Citation

Tang, Guohao and Xie, Yuwei and Zhu, Lin, Does U.S. Academic Research Destroy the Predictability of Global Stock Returns? (November 24, 2023). Available at SSRN: https://ssrn.com/abstract=4675266 or http://dx.doi.org/10.2139/ssrn.4675266

Guohao Tang

Hunan University - College of Finance and Statistics ( email )

Lushan Road (S), Yuelu District
Changsha, Hunan 410006
China

Yuwei Xie

Hunan University - School of Finance and Statistics ( email )

Shijiachong Road 109#
Changsha, Hunan 410079
China

Lin Zhu (Contact Author)

Hunan University - School of Finance and Statistics ( email )

Shijiachong Road 109#
Changsha, Hunan 410079
China

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