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Global Style Portfolios Based on Country Indices

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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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53094.

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Date of creation: 14 Jan 2014
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Handle: RePEc:pra:mprapa:53094

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Keywords: Diversification benefits; Factor returns; Regime Switching Models.;

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