Combining Equity Country Selection Strategies

42 Pages Posted: 10 Jun 2015 Last revised: 27 Jan 2017

See all articles by Adam Zaremba

Adam Zaremba

Poznań University of Economics and Business; University of Dubai

Multiple version iconThere are 2 versions of this paper

Date Written: July 10, 2015

Abstract

The recent increase in passive investment products has given investors easy access to international markets. The basic motivation of this paper is to offer new tools to investors who want to allocate assets across countries. This study investigates the performance of equity country selection strategies based on a combination of theoretically and empirically motivated variables. Thus, we create portfolios and assess their performance using asset pricing models. The empirical examination is based on data from 78 countries from the years 1999 to 2015. The strategies that are based on the earnings-to-price (EP) ratio, the turnover ratio, and skewness prove to be useful tools for international investors. Furthermore, portfolios from sorts on blended rankings of skewness combined with the EP ratio or the turnover ratio are also characterized by an attractive risk-return ratio. However, joint strategies do not outperform strategies that are based on single metrics. As a result, we argue that investors would be better off building a diversified portfolio rather than combining their options into one strategy because of the low correlation among returns on single-variable strategies.

Keywords: country selection strategies, asset pricing, cross section of stock returns, value investing, momentum, skewness preference, liquidity premium, turnover ratio, international investments

JEL Classification: G11, G12, G15

Suggested Citation

Zaremba, Adam, Combining Equity Country Selection Strategies (July 10, 2015). Available at SSRN: https://ssrn.com/abstract=2616056 or http://dx.doi.org/10.2139/ssrn.2616056

Adam Zaremba (Contact Author)

Poznań University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

University of Dubai ( email )

Academic City
Dubai, 14143
United Arab Emirates

HOME PAGE: http://adamzaremba.pl/

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