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Alpha momentum and alpha reversal in country and industry equity indexes

Zaremba, Adam; Umutlu, Mehmet; Karathanasopoulos, Andreas

Authors

Adam Zaremba

Andreas Karathanasopoulos



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.

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