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Value, Size and Momentum Portfolios in Real Time: The Cross-Section of South African Stocks

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Author Info

  • Ryans Bartens
  • Shakill Hassan

Abstract

We implement a recursive out-of-sample method to examine anomalies-based ex-ante predictability in the cross-section of stock returns. We obtain a series of simulated out-of-sample returns, consistent with investors using only prior information when choosing predictor variables. We find that, by commonly used performance criteria, real-time trading strategies based on size, value and momentum effects would not consistently outperform a passive index of South African stocks - despite consistent in-sample excess returns. Our results suggest that the empirical relationship between the anomalous factors and cross-sectional average returns is unstable.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 154.

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Date of creation: 2009
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Handle: RePEc:rza:wpaper:154

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Related research

Keywords: anomalies; real-time predictability; long/short portfolios; emerging markets; South Africa;

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Cited by:
  1. Shakill Hassan & Sean Smith, 2011. "The Rand as a Carry Trade Target: Risk, Returns and Policy Implications," Working Papers 235, Economic Research Southern Africa.

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