Timotheos Angelidis, Nikolaos Tessaromatis: Factor portfolios created by dynamically weighting country indices generated significant global market adjusted returns over the last 30 years.
Assistant Professor of FinanceDepartment of Economics, University of Peloponnese
Professor of FinanceEDHEC Business School and EDHEC-Risk Institute
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 behaviour of the market and factor portfolios is dependent on the risk regime. A regimedependent 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.
|Research Cluster :||Finance|