Bartram, Söhnke M. and Grinblatt, Mark (2019) Global market inefficiencies. Journal of Financial Economics . (In Press)

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Abstract

Using point-in-time accounting data, we estimate monthly fair values of 25,000+ stocks from 36 countries. A trading strategy based on deviations from fair value earns significant risk-adjusted returns (“alpha”) in most regions, especially the Asia Pacific, that are unrelated to known anomalies. The strategy’s 40-70 basis point per month alpha difference between emerging and developed markets contrast with prior research findings. A country’s pre-transaction-cost alpha is positively related to its trading costs, but exceeds country-specific institutional trading costs. Thus, global equity markets are inefficient, but relatively less so in countries with quantifiable market frictions, particularly trading costs, that deter arbitrageurs.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Financial Economics
Publisher:	Elsevier Science BV
ISSN:	0304-405X
Official Date:	2019
Dates:	Date Event 2019 Available 4 November 2019 Accepted
Date of first compliant deposit:	12 November 2019
Status:	Peer Reviewed
Publication Status:	In Press
Access rights to Published version:	Restricted or Subscription Access
Related URLs:	Publisher

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