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Opposites Attract: Combining Alpha Momentum and Alpha Reversal in International Equity Markets

Zaremba, Adam; Umutlu, Mehmet; Karathanasopoulos, Andreas


Adam Zaremba

Andreas Karathanasopoulos


The authors offer a new integrated framework to combine alpha momentum and alpha reversal into a superior investment strategy for international equity markets. Mixing both effects into a single blended alpha signal forms a stronger country and industry selection method. An equal-weighted strategy that simultaneously goes long the indexes with the highest short-term and the lowest long-term alphas and shorts the ones with the lowest short-term and highest long-term alphas yields monthly three-factor model alphas of 1.16% and 1.44% for countries and industries, respectively. The results are robust to alternative weighting schemes, the effect of trading costs, alternative alpha models, and controlling for popular return predictive variables.

Journal Article Type Article
Online Publication Date Apr 1, 2020
Publication Date 2020-04
Deposit Date Jan 29, 2023
Journal The Journal of Investing
Print ISSN 1068-0896
Electronic ISSN 2168-8613
Peer Reviewed Peer Reviewed
Volume 29
Issue 3
Pages 38-62
Keywords Statistical methods, factor-based models