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Factors relevance in asset pricing: new evidences in emerging markets from random matrix theory

Laura Molero González et al.

Economics and Business Letters2025https://doi.org/10.17811/ebl.14.2.2025.75-87article
AJG 1
Weight
0.50

What the paper says

There is an ongoing debate as to whether multi-factor models provide better results in explaining the cross-sectional expected return of financial assets than the Sharpe model. Despite the evidence provided about the superiority of market Beta in mayor developed markets, the debate does not seem to be closed, even less so for emerging markets. In this paper, we provide new evidence on the number of significant factors in emerging markets using Random Matrix Theory statistical techniques. We find that, with a confidence level of 99%, no significant factors are found in emerging markets, compared to developed ones, where market beta is always the unique factor. Our results confirm that emerging markets have different characteristics in relation to developed markets.

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https://doi.org/https://doi.org/10.17811/ebl.14.2.2025.75-87

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@article{laura2025,
  title        = {{Factors relevance in asset pricing: new evidences in emerging markets from random matrix theory}},
  author       = {Laura Molero González et al.},
  journal      = {Economics and Business Letters},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.17811/ebl.14.2.2025.75-87},
}

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Factors relevance in asset pricing: new evidences in emerging markets from random matrix theory

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.