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Abstract: In this paper we test for predictability of excess stock returns for 18 emerging markets. Using a range of macroeconomic and institutional factors, through a principal component analysis, we find some evidence of in-sample predictability for 15 countries. In-sample predictability is corroborated by out-of-sample tests. Using a mean-variance investor framework, we show that investors in most of these emerging markets can make significant profits from dynamic trading strategies. Finally, we show that investors in most countries where short-selling is prohibited could make significant gains if limited borrowing and short-selling were allowed. [Copyright &y& Elsevier]

Abstract: Should investors diversify across emerging stock markets or across industries to achieve improvements in their risk–return tradeoffs especially during financial crisis periods? We examine the issue using individual firm data from a selection of emerging markets and including the period of the 1997 Asian financial crisis. We find that country effects were the dominant force behind the low co-movements among emerging stock market returns. There is evidence of increased industry effects beginning at the time of the Asian financial crisis, but this may have been a temporary phenomenon associated with contagion effects during the crisis. [Copyright &y& Elsevier]

Abstract: Using monthly foreign flows data on Istanbul Stock Exchange (ISE) and employing a structural VAR model, we analyze the interaction between foreigners'' trading and emerging stock returns. In contrast to most of the available theory and repeated previous findings on other markets, foreign investors negative-feedback-trade with respect to past local returns in ISE, however only in rising markets and especially under macroeconomic instability. Net foreign flows forecast future market returns, but not individual stock returns. Price impacts are permanent, suggesting that foreigners'' trading incorporates information. Overall, results reject previous conclusions that foreigners are uninformed positive feedback traders: rather, they are a heterogeneous group dominated by sophisticated investors able to rationally adjust their trading style in line with the market''s prevailing characteristics. [Copyright &y& Elsevier]

Abstract: This paper examines the link between over-subscription and pre-listing information in fixed-price IPOs. We find a strong negative relation between investors'' opportunity cost of fund and over-subscription. Since investors are required to make upfront payment at the time of IPO applications, lengthy offer period increases investors'' opportunity cost of fund and thus reduces their interests in the IPOs. To increase over-subscription, firms should time their IPOs to coincide with periods of large positive initial returns and low volume of IPO activity. We find that over-subscription is negatively correlated with offer price but is not significantly related to issue size. [Copyright &y& Elsevier]

Abstract: Weak-form efficiency in the stock markets of the Gulf Cooperation Council is examined using daily, weekly, and monthly index data for the 10-year period 2000–2009. Various variance ratio test specifications with specific homo- and heteroscedasticity assumptions found evidence of nonlinear dependence for the daily data, supporting the evidence in favor of a rejection of the random walk. A correction procedure for thin and nonsynchronous trading was applied but failed to produce significantly different results. Following an ARCH based model building procedure, conditional heteroscedasticity models are applied to the log return series. Significant differences in forecasting performance cannot be detected. The random walk hypothesis is generally rejected for daily but differences appear across markets using weekly and monthly data. The increased involvement of foreign institutional investors may play a role in the increased serial correlation in stock returns in the most recent period. [Copyright &y& Elsevier]

Abstract: This paper tests how effective global models are at pricing the cross section of emerging market (EM) stock returns over a recent post-liberalization period. We apply the tests of Kan et al. (2009). Our results show that conditional models and currency factors do perform better than unconditional models and single factor models and there are some differences in the models in the two subperiods of our data. The important implication of this paper for international investors is none of our results are significant when we allow for model misspecification and none of the alternative models specifically outperform the World CAPM. [Copyright &y& Elsevier]

This paper looks at the investment allocation process employed by portfolio investors in emerging markets. In particular, it examines the first of a two-stage decision process: first, investors create a sub-set of investable countries to be analyzed later in further detail; second, they weigh expected returns versus risk and subsequently allocate their funds. This study hypothesizes that the determination of whether a country is investable or not is influenced by a number of factors, especially related to size, quality of “housekeeping” (macro-policies, political economy, local financial markets, corporate governance, etc.) and efficiency of “plumbing” (legal and regulatory framework, custody, clearing and settlement, taxes, etc.). By interviewing many types of these investors in both the United States and the United Kingdom, we delve into their decision-making processes as well as attempt to uncover the factors they indicate matter most in defining the investable universe. We determine the relative importance of such housekeeping and plumbing factors while highlighting the role of external issues, such as index benchmarking and U.S. foreign policy. We recognize from the outset that the most profound effects on investment flows, or the required minimum expected returns, arise from improvements or deteriorations in macro-policies. However, at the margin, improvements can be made in country policies that will, for a given macro-situation, improve the ability of a country to attract international investment flows. [Copyright &y& Elsevier]