What Factors Drive Global Stock Returns?
Using monthly returns for over 27,000 stocks from 49 countries over a three-decade period, we show that a multifactor model that includes factor-mimicking portfolios based on momentum and cash flow-to-price captures significant time-series variation in global stock returns, and has lower pricing errors and fewer model rejections than the global CAPM or a popular model that uses size and book-to-market factors. We find reliable evidence that the global cash flow-to-price factor is related to a covariance risk model. In contrast, we reject the covariance risk model in favor of a characteristic model for size and book-to-market factors. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.
Year of publication: |
2011
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Authors: | Hou, Kewei ; Karolyi, G. Andrew ; Kho, Bong-Chan |
Published in: |
Review of Financial Studies. - Society for Financial Studies - SFS. - Vol. 24.2011, 8, p. 2527-2574
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Publisher: |
Society for Financial Studies - SFS |
Saved in:
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