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Volume 24, Numbers 1 & 2 / March/June 2020 ,
Multinational Finance Journal, 2020, vol. 24, no. 1/2, pp. 1-37
Sean Lu , QMA LLC, USA    Corresponding Author
Cindy Lu , Stanford University, USA

A new approach of constructing an idiosyncratic momentum using common style factors from the Barra risk model has been proposed. The method removes the limitation in the conventional approach of constructing idiosyncratic momentum using Fama-French factors, and allows to build more effective idiosyncratic momentum factor for a wide variety of international markets where the Fama-French model is not available. The performance results indicate that the idiosyncratic momentum factor carries a resemblance to the conventional price momentum, but with much lower variance and exposure to the common market factors, such as value, size, and volatility. The long-short portfolio test for both China's A-Share IMI and CSI 500 indices in the Chinese equity market demonstrates the significant improvement of this factor's return over the conventional momentum. The results strongly suggest the idiosyncratic momentum factor could be used as an effective momentum strategy for investing in China's stock market.

Keywords : stocks; price momentum; idiosyncratic momentum; risk model; regression
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Multinational Finance Journal, 2020, vol. 24, no. 1/2, pp. 39-64
Gualter Couto , University of Azores, Portugal    Corresponding Author
Pedro Pimentel , University of Azores, Portugal
Ana Cunha , University of Azores, Portugal

The equity risk premium is key for the cost of capital and a crucial tool to guide investment decisions. In the literature, an ex-post approach is widely used to estimate equity risk premium investor's future claims. In this paper, Merton's framework (1980) is applied to the Eurozone, USA, and Asia, using historical data for the period between 2002 and 2015. The expected equity risk premium will be calculated in the context of the financial crisis that started in 2008 and will be testing the reward-to-risk ratio non-negativity constraint. For all three economic areas, empirical analyses suggest investors' aggregate risk preferences that are stable for measurable periods. The authors subscribe to a direct connection between the time under analysis and the accuracy of equity risk premium estimates. At best, it is expected that equity risk premium for the Eurozone, USA, and Asia stand at 5.04%, 4.91%, and 7.75%, respectively.

Keywords : equity; risk; premium; preferences; volatility
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Multinational Finance Journal, 2020, vol. 24, no. 1/2, pp. 65-91
Dimitrios G Giantsios , University of Macedonia, Greece
Athanasios G. Noulas , University of Macedonia, Greece    Corresponding Author

This article employs a flexible stochastic frontier to estimate revenue efficiency and efficiency convergence for 22 European Union insurance markets during the financial crisis and after. It also looks at firm-specific factors that might affect inefficiency. Revenue efficiency falls with the beginning of the financial crisis but remains relatively stable over the examined period. The average revenue efficiency is found to be 57.4% indicating a 42.6% possible increase in revenue efficiency on average. The results on the issue of convergence are mixed; β-convergence has taken place but not σ-convergence. In fact, σ-divergence occurred during the financial crisis period. Size and diversification seem to negatively affect efficiency.

Keywords : revenue efficiency; β-convergence; σ-convergence; European life insurance industry; stochastic frontier
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