What Factors Drive Global Stock Returns?

  title={What Factors Drive Global Stock Returns?},
  author={K. Hou and G. Karolyi and B. Kho},
  journal={International Finance},
  • K. Hou, G. Karolyi, B. Kho
  • Published 2011
  • Economics
  • International Finance
  • 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… CONTINUE READING
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