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Global Style Portfolios Based on Country Indices

Author

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  • Angelidis, Timotheos
  • Tessaromatis, Nikolaos

Abstract

Factor portfolios created by dynamically weighting country indices generated significant global market adjusted returns over the last thirty years. The comparison between stock and country based factor portfolios suggests that country based value, size and momentum factor portfolios implemented through index futures or country ETFs capture a large part of the return of stock based factor strategies. Given the complex issues and costs involved in implementing stock based factor strategies in practice, country based factor strategies offer a viable alternative. The behavior of the market and factor portfolios is dependent on the risk regime. A regime-dependent dynamic global factor portfolio outperforms the world equity market portfolio. The outperformance, in and out of sample, is robust to transaction costs and alternative portfolio construction methodologies.

Suggested Citation

  • Angelidis, Timotheos & Tessaromatis, Nikolaos, 2014. "Global Style Portfolios Based on Country Indices," MPRA Paper 53094, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53094
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    References listed on IDEAS

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    Cited by:

    1. Calice, Giovanni & Lin, Ming-Tsung, 2021. "Exploring risk premium factors for country equity returns," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 294-322.
    2. Adam Zaremba, 2018. "Country Risk and Expected Returns Across Global Equity Markets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(4), pages 374-398, September.

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    More about this item

    Keywords

    Diversification benefits; Factor returns; Regime Switching Models.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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