Diversified Machine Learning in Emerging Markets

Machine Learning and The Cross-Section of Emerging Market Stock Returns

AuthorsMatthias X. Hanauer; Tobias Kalsbach

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=4287550

Invest in top-decile emerging market stocks using machine learning models, including trees and neural networks, with monthly rebalancing and hedging via a broad EM index

Machine learning captures underreaction in emerging markets, utilizes data efficiently, and adapts faster than linear models, generating superior risk-adjusted returns over longer holding periods.