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. © 2011 The Authors.
CITATION STYLE
Hou, K., Karolyi, G. A., & Kho, B. C. (2011). What factors drive global stock returns? Review of Financial Studies, 24(8), 2527–2574. https://doi.org/10.1093/rfs/hhr013
Mendeley helps you to discover research relevant for your work.