Leopold Baumgartner won the ACATIS Value Prize 2020 (master's thesis category) with his thesis "Mispricing Factors in International Markets"! Every year ACATIS honours academic research on the subject of value investing with the ACATIS Value Prize. For more information about the "ACATIS Value Prize", please click here. The thesis was supervised by Dr. Vitor Azevedo.

Summary

The thesis examines the robustness and the relative performance of the four-factor mispricing model proposed by Stambaugh/Yuan (2017). The model is tested in five developed markets and compared to competing models. Two modified versions of the four-factor mispricing model are also considered: a single-mispricing factor model and a four-factor Mispricing-Momentum model. The models are compared on their ability to explain average anomaly and factor returns. Further, all models are ranked on the maximum squared Sharpe ratio. The results show that the four-factor mispricing model is superior to the Fama/French (1993, 2015) three- and five-factor models in four of the five countries. However, the two modified mispricing factor models generally outperform the four-factor mispricing model. The performance of mispricing factors significantly increases if they are constructed solely from stocks with complete information on anomaly measures. Overall, a model´s performance varies between countries, and none of the models emerge as superior across all investigated countries.