Common Patterns of Predictability in the Cross-Section of International Stock Returns

31 Pages Posted: 20 Mar 2007

See all articles by Steven L. Heston

Steven L. Heston

University of Maryland - Department of Finance

Ronnie Sadka

Boston College - Carroll School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 12, 2007

Abstract

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 future years in that same calendar month. This effect lasts for 10 years and the same pattern appears in Canada, Japan, and twelve European countries. This return pattern is independent of country, currency effects, and market capitalization. These strategies are not highly correlated across countries; this indicates they do not reflect pervasive international risk. Instead this common seasonal structure in international stocks suggests countries share similar segmented return mechanisms.

JEL Classification: G12, G15

Suggested Citation

Heston, Steven L. and Sadka, Ronnie, Common Patterns of Predictability in the Cross-Section of International Stock Returns (March 12, 2007). Available at SSRN: https://ssrn.com/abstract=971141 or http://dx.doi.org/10.2139/ssrn.971141

Steven L. Heston

University of Maryland - Department of Finance ( email )

Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States

Ronnie Sadka (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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