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The profitability effect: Insights from international equity markets
Author(s) -
Chen TeFeng,
Sun Lei,
Wei K. C. John,
Xie Feixue
Publication year - 2018
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12189
Subject(s) - profitability index , equity (law) , portfolio , economics , investment (military) , emerging markets , monetary economics , business , econometrics , financial economics , finance , political science , law , politics
Using data from 33 international markets over the period 1990–2017, we reveal that the profitability effect exists in many countries other than the USA, but the size of this effect is sensitive to the measure of profitability and portfolio sorts. The profitability effect is significant in pooled developed and global markets, though less so in emerging markets. The evidence lends support to incorporating a profitability factor in regional/global factor models. Cross‐region and cross‐country analyses show mixed evidence for a positive relationship between profitability effects and market developments, though the overall findings lean toward supporting the prediction of the investment model.