Review of Financial Studies Vol. 24 No. 8 2011
What Factors Drive Global Stock Returns?
Abstract
Using monthly returns for over 27,000 stocks from 49 countries over a three-decade period, we show that a multifactor model that includes factor-mimicking portfolios based on momentum and cash flow-to-price captures significant time-series variation in global stock returns, and has lower pricing errors and fewer model rejections than the global CAPM or a popular model that uses size and book-to-market factors. We find reliable evidence that the global cash flow-to-price factor is related to a covariance risk model. In contrast, we reject the covariance risk model in favor of a characteristic model for size and book-to-market factors.
- DOI
- 10.1093/rfs/hhr013
- Volume
- 24
- Issue
- 8
- Pages
- 2527-2574
- Language
- en
- Sources
- openalex crossref