Are There Fences in the Global Factor Zoo?

43 Pages Posted: 16 Apr 2024

See all articles by Merlin Bartel

Merlin Bartel

University of Liechtenstein

Sebastian Stöckl

University of Liechtenstein

Joshua Traut

University of St. Gallen

Date Written: April 5, 2024

Abstract

We revisit the established dominance of local factors in international asset pric-
ing by examining the predictability anomalies through the lens of factor mo-
mentum signals. Differing from previous results for asset pricing models where
local factors are typically seen as superior to regional and global factors, our
research reveals that regional and global signals surpass local signals in fore-
casting factor risk premiums. Strategies formed on non-local signals generally
outperform strategies formed on local signals in all considered metrics. This
outperformance is more pronounced for factors and regions with high structural
integration. Non-local factor predictability potentially improves leading asset
pricing models. Moreover, non-local signals revive momentum investing in mar-
kets previously thought to lack momentum opportunities, such as Japan.

Keywords: International Asset Pricing, Factor Timing, Factor Momentum

JEL Classification: G12, G15, F30

Suggested Citation

Bartel, Merlin and Stöckl, Sebastian and Traut, Joshua, Are There Fences in the Global Factor Zoo? (April 5, 2024). Available at SSRN: https://ssrn.com/abstract=4785874 or http://dx.doi.org/10.2139/ssrn.4785874

Merlin Bartel (Contact Author)

University of Liechtenstein ( email )

Fuerst Franz Josef-Strasse
Vaduz, 9490
Liechtenstein

Sebastian Stöckl

University of Liechtenstein ( email )

Fürst-Franz-Josef-Strasse
Vaduz, FL-9490
Liechtenstein

HOME PAGE: http://www.sebastianstoeckl.com

Joshua Traut

University of St. Gallen ( email )

Swiss Institute of Banking and Finance
Unterer Graben 21
St.Gallen, St. Gallen 9000
Switzerland

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