Resurrecting the market factor: A case of data mining across international markets

In this paper, using the stepwise model selection method proposed by Harvey and Liu (2021), we study whether anomalies can explain the cross-sectional individual stock returns in 38 countries for the period between 1992 and 2018. Among the 95 anomalies examined, we document the following results: (1) the market factor is the single most dominant factor in explaining the cross-sectional equity returns both on individual and portfolio levels; (2) local, regional and global market factors are equally useful; (3) the dominant role of the market factor, regardless whether it is the local, regional, or global version, is concentrated in Federal Open Market Committee (FOMC) months. Collectively, the results support a strong role of the market factor in the integrated international equity markets. •The ability of factors to explain cross-sectional stock returns across 38 countries from 1992 to 2018 is assessed using the stepwise model selection method proposed by Harvey and Liu (2021).•The market factor is the most dominant factor across the markets.•The dominant role of the market factor concentrates during Federal Open Market Committee periods, supporting integrated international equity markets.