Matthias Hanauer and Tobias Karlsbach have been awarded runner-up of the CFA Germany Investment Research Award for their paper "Machine learning and the cross-section of emerging market stock returns". The paper has been published in the Emerging Markets Review.
Paper abstract
This paper compares various machine learning models to predict the cross-section of emerging market stock returns. We document that allowing for non-linearities and interactions leads to economically and statistically superior out-of-sample returns compared to traditional linear models. Although we find that both linear and machine learning models show higher predictability for stocks associated with higher limits to arbitrage, we also show that this effect is less pronounced for non-linear models. Furthermore, significant net returns can be achieved when accounting for transaction costs, short-selling constraints, and limiting our investment universe to big stocks only.
About the CFA Germany Investment Research Award
CFA Society Germany awared the CFA Germany Investment Research Award for the fourth time in 2024. An expert jury jugded the papers in the field of investment research with regard to their scientific contribution and practical relevance.
Eligable submissions were high-quality published papers or papers accepted for publication by scientific journals from investment professionals working in Germany and academic scholars enrolled at German universities and/or business schools.
For more information about the "CFA Germany Investment Research Award", please click here.
About the CFA Society Germany
CFA Society Germany is the leading association of investment professionals in Germany. With over 2,800 members, CFA Society Germany represents a broad base of the investment sector and advocates initiatives to advance ethics, market integrity and professional standards of practice in the financial industry and capital markets. CFA Society Germany is a local member society of CFA Institute, the global association of CFA® charterholders and financial experts with more than 165,000 members in over 164 countries and regions.