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Value and Momentum in Frontier Emerging Markets

Value and Momentum in Frontier Emerging Markets

14-09-2010 | Research

We document the presence of economically and statistically significant value and momentum effects in the new emerging equity markets in the world, the so-called frontier emerging markets. We are the first to investigate the characteristics of individual stocks in these markets.

  • Wilma de Groot, PhD
    Wilma
    de Groot, PhD
    Head of Core Quant Equities

Our unique data set consists of more than 1,400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier emerging markets. Our results serve as out-of-sample evidence for the existence of value and momentum effects that have previously been reported for developed and emerging markets. Further, we provide empirical evidence that value and momentum strategies within frontier markets are negatively correlated, and are uncorrelated with the same value and momentum strategies in developed and emerging markets. Our mean-variance spanning tests indicate that investors who expand their investment opportunity set with value and momentum investment strategies based on stocks from frontier markets can significantly improve the efficiency of their investment portfolio.

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