Stock market anomalies

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Interest in Latin American emerging markets (LAEM) has surged recently, yet the price determination process in their stock markets remains a topic of debate, particularly in comparison to developed markets. While LAEM has often been criticized for weak institutions, unstable politics, and high trading costs, this perspective overlooks the diversity among emerging markets regarding their development and institutional frameworks. Practitioners continue to believe that LAEM can reduce an international investor's unconditional portfolio risk. This thesis aims to address three key questions: (1) What are the investment laws in LAEM, and how do they compare to those in developed countries? (2) How heterogeneous are the implicit trading costs in LAEM, what factors contribute to this heterogeneity, and how do these costs compare to those in developed markets? (3) Is the predictability of stock returns in LAEM different from that observed in developed markets? A significant body of research in modern financial economics has focused on quantifying the trade-off between risk and expected returns of financial securities, providing a foundation for exploring these questions.