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Exploring risk premium factors for country equity returns

journal contribution
posted on 23.07.2021, 08:01 authored by Giovanni CaliceGiovanni Calice, Ming-Tsung Lin
In this paper, we study a comprehensive set of risk premia of country equity returns for 45 countries over the sample period 2002 to 2018 in both a single and a multiple factor setting. Using a new three-pass estimation method for factor risk premia by Giglio and Xiu (2021), we find that several factors, including default risk, are also priced in country equity excess returns, controlled by the Fama–French 5-factor and Carhart model. Moreover, we apply a novel approach to investigate the multi-factor impact on country equity returns. We find that the multi-factor information, constructed from the first principal component of the statistically significant single factors, provides a consistent and stronger prediction of anomalies in country equity returns.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Empirical Finance

Volume

63

Pages

294-322

Publisher

Elsevier BV

Version

AM (Accepted Manuscript)

Rights holder

© Elsevier

Publisher statement

This paper was accepted for publication in the journal Journal of Empirical Finance and the definitive published version is available at https://doi.org/10.1016/j.jempfin.2021.07.003.

Acceptance date

13/07/2021

Publication date

2021-07-17

Copyright date

2021

ISSN

0927-5398

Language

en

Depositor

Dr Giovanni Calice. Deposit date: 22 July 2021