Alpha momentum and alpha reversal in country and industry equity indexes

Zaremba, Adam; Umutlu, Mehmet; Karathanasopoulos, Andreas

Abstract

Do past alphas predict future country and industry returns? Examination of equity indexes from 51 stock markets between 1973 and 2018 allows us to demonstrate new return patterns in the cross-section of country and industry returns. Past short-term (long-term) alphas positively (negatively) predict future returns. These phenomena can be translated into effective international equity allocation strategies, producing economically and statistically significant raw and risk-adjusted returns. The profitability is robust to many considerations, including alternative alpha models, the role of trading costs, different holding periods, or subsample analyses. Furthermore, the alpha momentum subsumes its return-based counterpart.

Citation

Zaremba, A., Umutlu, M., & Karathanasopoulos, A. (2019). Alpha momentum and alpha reversal in country and industry equity indexes. Journal of Empirical Finance, 53, 144-161. https://doi.org/10.1016/j.jempfin.2019.07.003

• Journal Article Type: Article
• Acceptance Date: Jul 9, 2019
• Online Publication Date: Jul 12, 2019
• Publication Date: 2019-09
• Deposit Date: Jan 29, 2023
• Journal: Journal of Empirical Finance
• Print ISSN: 0927-5398
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 53
• Pages: 144-161
• DOI: https://doi.org/10.1016/j.jempfin.2019.07.003
• Keywords: Alpha momentum, Alpha reversal, International investment, Country momentum, Country reversal, Industry momentum, Industry reversal, Asset pricing, The cross-section of returns return predictability, Equity anomalies