Global Style Portfolios Based on Country Indices

Timotheos Angelidis, Nikolaos Tessaromatis: Factor portfolios created by dynamically weighting country indices generated significant global market adjusted returns over the last 30 years.

Author(s):

Timotheos Angelidis

Assistant Professor of FinanceDepartment of Economics, University of Peloponnese

Nikolaos Tessaromatis

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.

Type: Working paper
Date: le 07/04/2014
Research Cluster : Finance

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