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Tests of Equity Market Anomalies for Select Emerging Markets

Author

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  • Sanjay Sehgal
  • Srividya Subramaniam
  • Florent Deisting

Abstract

The study tests prominent equity market anomalies for six emerging markets - Brazil, China, India, Indonesia, South Korea and South Africa. We find that using the Fama French model (FFM) as performance benchmark the size anomaly is present in India, South Korea and Brazil, value anomaly in South Korea and South Africa, momentum in India and South Africa, mild reversals in Brazil, liquidity anomaly in South Korea and South Africa, profitability anomaly in Brazil and South Africa, accruals anomaly in South Africa and stock repurchases anomaly in India and South Africa. Stock issues anomaly does not pose a challenge to asset pricing for sample markets. The four factor liquidity augmented FFM is a better descriptor of asset pricing compared to CAPM and FFM only in the Indian context. The Fama French model seems to be an appropriate performance benchmark for other sample emerging markets. South Africa seems to be the most exciting destination for portfolio managers followed by Brazil, South Korea and India. The research is relevant for global portfolio managers who indulge in international diversification as well as for policy makers who are looking for long-term economic cooperation and greater financial integration among these markets.

Suggested Citation

  • Sanjay Sehgal & Srividya Subramaniam & Florent Deisting, 2014. "Tests of Equity Market Anomalies for Select Emerging Markets," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(3), pages 27-46.
  • Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:27-46
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    Cited by:

    1. Asheesh Pandey & Sanjay Sehgal, 2016. "Explaining Size Effect for Indian Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 23(1), pages 45-68, March.
    2. Jungmu Kim & Youngkyung Ok & Yuen Jung Park, 2020. "Institutional Investors’ Trading Response to Stock Market Anomalies: Evidence from Korea," Sustainability, MDPI, vol. 12(4), pages 1-17, February.
    3. Vibhuti Vasishth & Sanjay Sehgal & Gagan Sharma, 2021. "Size Effect in Indian Equity Market: Myth or Reality?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(1), pages 101-119, March.
    4. Sanjay Sehgal & Vidisha Garg, 2016. "Cross-sectional Volatility and Stock Returns: Evidence for Emerging Markets," Vikalpa: The Journal for Decision Makers, , vol. 41(3), pages 234-246, September.

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    More about this item

    Keywords

    CAPM; Fama French Model; Emerging Markets; Market Anomalies; International Diversification;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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