Common Patterns of Predictability in the Cross-Section of International Stock Returns
Steven L. Heston
University of Maryland - Department of Finance
Boston College - Carroll School of Management
July 10, 2007
This paper studies the performance of international stock strategies based on historical returns. Stocks that outperform the local market in a particular month continue to outperform the local market in futures years in that same calendar month. This effect lasts for 10 years and in addition to the U.S., the same pattern appears in Canada, twelve European countries, and most notably in Japan. This return pattern is independent of country, currency, and market capitalization. The resulting strategies are not highly correlated across countries. This indicates they may not reflect return premiums for pervasive international risk. Instead this common season structure in internaional stocks suggests countries share similar segmented return mechanisms.
Number of Pages in PDF File: 35
Keywords: International Stock Returns, Market Integration, Behavioral Finance
JEL Classification: G15, F36working papers series
Date posted: March 20, 2008
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