Are There Fences in the Global Factor Zoo?
43 Pages Posted: 16 Apr 2024
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: 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
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