TY - JOUR
T1 - A New Partial-Segmentation Approach to Modeling International Stock Returns
AU - Karolyi, G. Andrew
AU - Wu, Ying
N1 - Publisher Copyright:
© 2018 Michael G. Foster School of Business, University of Washington.
PY - 2018/4/1
Y1 - 2018/4/1
N2 - We propose a new multi-factor model for international stock returns that includes size, value, and momentum factor portfolios and that builds them in a partial-segmentation capital market framework. Accounting for externalities driven by the incomplete accessibility to stocks and stock markets, our model not only captures strong common variation in international stock returns but also achieves low pricing errors and rejection rates relative to pure segmentation and pure integration models. This partial-segmentation approach is evaluated using monthly returns for over 37,000 stocks from 46 developed and emerging market countries over 2 decades and for a wide variety of test assets.
AB - We propose a new multi-factor model for international stock returns that includes size, value, and momentum factor portfolios and that builds them in a partial-segmentation capital market framework. Accounting for externalities driven by the incomplete accessibility to stocks and stock markets, our model not only captures strong common variation in international stock returns but also achieves low pricing errors and rejection rates relative to pure segmentation and pure integration models. This partial-segmentation approach is evaluated using monthly returns for over 37,000 stocks from 46 developed and emerging market countries over 2 decades and for a wide variety of test assets.
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U2 - 10.1017/S0022109017001016
DO - 10.1017/S0022109017001016
M3 - Article
AN - SCOPUS:85044180049
SN - 0022-1090
VL - 53
SP - 507
EP - 546
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 2
ER -