ScienceDirect Publication: Journal of Empirical Finance
Mon, 30 Sep 2019 13:02:53 GMT language
Publication date: September 2019
Source: Journal of Empirical Finance, Volume 53
Author(s): Adam Zaremba, Mehmet Umutlu, Andreas Karathanasopoulos
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.