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This paper investigates the explanatory and forecasting power of macroeconomic fundamentals on emerging market sovereign credit spreads. We pay special attention to a new set of macroeconomic factors related to market values that reflect investor expectations concerning future economic performance. The model we propose captures a significant part of the empirical variation in spreads. Importantly, it also includes a powerful forecasting component that extends up to 12 months outside the sample period. The forward-looking variables that we construct are significant and complement and enhance the explanatory content of the conventional variables found in the extant literature. [ABSTRACT FROM AUTHOR]

In this paper, we construct zero cost portfolios based on second and third degree stochastic dominance and show that they produce systematic, statistically significant, abnormal returns. These returns are robust with respect to the single index CAPM, the Fama-French three-factor model, the Carhart four-factor model, and the liquidity five-factor model. They are also robust with respect to momentum portfolios, transactions costs, varying time periods, and when broken down by a range of risk factors, such as firm size, leverage, age, return volatility, cash flow volatility, and trading volume. [ABSTRACT FROM AUTHOR]