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Predicting Equity Returns in Emerging Markets

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  • Yigit Atilgan
  • K. Ozgur Demirtas
  • A. Doruk Gunaydin

Abstract

This study investigates the relation between firm-specific attributes and future equity returns in 23 emerging markets. Equal-weighted portfolio returns reveal strong evidence of short-term momentum (rather than reversal) and medium-term return momentum. We also find evidence that market beta, book-to-market ratio and downside risk metrics predict equity returns, however, these relations get weaker once value-weighting is used. In univariate regressions, smaller firms with higher idiosyncratic volatility, lottery-like characteristics and stock-specific downside risk are associated with higher future returns, however, these relations disappear in a multivariate setting. We conclude that the most robust cross-sectional effects are short- and medium-term return momentum.

Suggested Citation

  • Yigit Atilgan & K. Ozgur Demirtas & A. Doruk Gunaydin, 2021. "Predicting Equity Returns in Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(13), pages 3721-3738, October.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:13:p:3721-3738
    DOI: 10.1080/1540496X.2020.1822808
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