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Bartram, Söhnke M. and Grinblatt, Mark (2021) Global market inefficiencies. Journal of Financial Economics, 139 (1). pp. 234-259. doi:10.1016/j.jfineco.2020.07.011 ISSN 0304-405X.
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Official URL: https://doi.org/10.1016/j.jfineco.2020.07.011
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 | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance Q Science > QA Mathematics |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | International finance, Valuation, Capital assets pricing model, Transaction costs, Principal components analysis | ||||||||
| Journal or Publication Title: | Journal of Financial Economics | ||||||||
| Publisher: | Elsevier Science BV | ||||||||
| ISSN: | 0304-405X | ||||||||
| Official Date: | January 2021 | ||||||||
| Dates: |
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| Volume: | 139 | ||||||||
| Number: | 1 | ||||||||
| Page Range: | pp. 234-259 | ||||||||
| DOI: | 10.1016/j.jfineco.2020.07.011 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 12 November 2019 | ||||||||
| Date of first compliant Open Access: | 22 January 2022 | ||||||||
| RIOXX Funder/Project Grant: |
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