Article ID Journal Published Year Pages File Type
5069360 Finance Research Letters 2016 8 Pages PDF
Abstract
The present study provides a risk-based explanation for the country-level size and value effects. The research demonstrates that the small-country effect is fully explained by cross-sectional variation in the country risk. Furthermore, accounting for the country risk decreases the alphas on value strategies by approximately 30%, making them statistically insignificant. The results are robust to the affect of taxes on dividends, alternative risk measures, and changes in sorting variables used to implement the strategies examined. The phenomenon is particularly pronounced in emerging markets.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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