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Alpha momentum and alpha reversal in country and industry equity indexes

Adam Zaremba, Mehmet Umutlu and Andreas Karathanasopoulos

Journal of Empirical Finance, 2019, vol. 53, issue C, 144-161

Abstract: 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.

Keywords: Alpha momentum; Alpha reversal; International investment; Country momentum; Country reversal; Industry momentum; Industry reversal; Asset pricing; The cross-section of returns return predictability; Equity anomalies (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jempfin.2019.07.003

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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