tailieunhanh - Local Return Factors And Turnover In Emerging Stock Markets

An equally important point is how the funds mobilised/owned by the companies are being utilised. In a study conducted at the ISID it was noticed that companies of different sizes extended loans to or invested in other enterprises in a big way. Such phenomenon is more prevalent in profit-making companies. Within the profit-making companies those who increased their borrowings invested relatively more than the rest. There is growing importance of group companies and non-marketable securities as also advances to group companies in such outside investments. The average returns from such investments, were, however, lower than the. | THE JOURNAL OF FINANCE VOL. LIV NO. 4 AUGUST 1999 Local Return Factors and Turnover in Emerging Stock Markets K. GEERT ROUWENHORST ABSTRACT The factors that drive cross-sectional differences in expected stock returns in emerging equity markets are qualitatively similar to those that have been documented for developed markets. Emerging market stocks exhibit momentum small stocks outperform large stocks and value stocks outperform growth stocks. There is no evidence that high beta stocks outperform low beta stocks. A Bayesian analysis of the return premiums shows that the combined evidence of developed and emerging markets strongly favors the hypothesis that similar return factors are present in markets around the world. Finally there exists a strong cross-sectional correlation between the return factors and share turnover. There is growing empirical evidence that multiple factors are cross-sectionally correlated with average returns in the United States. Measured over long time periods small stocks earn higher average returns than large stocks Banz 1981 . Fama and French 1992 1996 and Lakonishok Shleifer and Vishny 1994 show that value stocks with high book-to-market B M earnings-to-price E P or cash flow to price C P outperform growth stocks with low B M E P or C P. Moreover stocks with high return over the past three months to one year continue to outperform stocks with poor prior performance Jegadeesh and Titman 1993 . The evidence that beta is also compensated for in average returns is weaker Fama and French 1992 Kothari Shanken and Sloan 1995 The interpretation of the evidence is strongly Some believe that the premiums are a compensation for pervasive risk factors others attribute them to firm characteristics or an inefficiency in the way markets incorporate information into prices. Yet others argue that the premiums may be biased by survivorship or data snooping. A motivation for examining inter- Yale School of Management Yale University. I thank .