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Resurrecting the market factor: A case of data mining across international markets

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  • Hoang, Khoa
  • Huang, Ronghong
  • Truong, Helen

Abstract

In this paper, using the stepwise model selection method proposed by Harvey and Liu (2021), we study whether anomalies can explain the cross-sectional individual stock returns in 38 countries for the period between 1992 and 2018. Among the 95 anomalies examined, we document the following results: (1) the market factor is the single most dominant factor in explaining the cross-sectional equity returns both on individual and portfolio levels; (2) local, regional and global market factors are equally useful; (3) the dominant role of the market factor, regardless whether it is the local, regional, or global version, is concentrated in Federal Open Market Committee (FOMC) months. Collectively, the results support a strong role of the market factor in the integrated international equity markets.

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  • Hoang, Khoa & Huang, Ronghong & Truong, Helen, 2023. "Resurrecting the market factor: A case of data mining across international markets," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x23002548
    DOI: 10.1016/j.pacfin.2023.102183
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    More about this item

    Keywords

    Asset pricing; Factor selection; Data mining; Multiple testing; International markets;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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