Work

What Factors Drive Global Stock Returns?

Year: 2011

Type: article

Abstract: 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.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhr013

Authors: Kewei Hou, G. Andrew Karolyi, Bong-Chan Kho

Institutions: The Ohio State University, Cornell University, Seoul National University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3122909691

FWCI: 52.05

Cites: 119

Cited by: 621

Related to: 9