Return predictability and contrarian profits of international index futures

Using futures markets, we examine the lead‐lag relationships among 11 industrialized countries. Lagged monthly returns for several countries have return predictability comparable to those in the United States for the 1988–2016 period. The international futures markets are more correlated in market downturns, while the lead‐lag relationships are more significant in market upturns. Consistent with these asymmetric relationships, a contrarian strategy (in particular, by buying the losers) offers significant profits in an up market but not in a down market. The contrarian profits are not captured by a factor model using global equity factors and momentum profits.