%0 Journal Article
%T Predicting the performance of equity anomalies in frontier emerging markets: a Markov switching model approach
%A Adam Zaremba
%A Anna Czapkiewicz
%A Jan Jakub Szczygielski
%J Economic Research-Ekonomska Istra£¿ivanja
%D 2019
%R https://doi.org/10.1080/1331677X.2019.1653782
%X Abstract Equity anomalies in frontier markets appear and disappear over time. This article aims to demonstrate the predictability of which of these transient anomalies will be profitable using a Markov switching model. To do so, we examine 140 equity anomalies identified in the literature using a unique sample of over 3,600 stocks from 23 frontier equity markets between 1997 and 2016. The application of a Markov switching model reveals that the time-series pattern of expected returns is dependent upon the type of anomaly; some anomalies become unprofitable over time whereas profitability increases in tandem with the development of a specific stock market for other types of anomalies. Results further indicate that forecasts of the next month¡¯s return obtained from this model can translate into profitable investment strategies. We find that an anomaly selection strategy that relies on the model produces abnormal returns and outperforms a na£¿ve benchmark that considers all the anomalies. We go onto demonstrate that our results are robust
%U https://www.tandfonline.com/doi/full/10.1080/1331677X.2019.1653782