Are return predictors of industrial equity indexes common across regions?

Pelin Bengitöz and Mehmet Umutlu
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Pelin Bengitöz: Yasar University

Journal of Asset Management, 2023, vol. 24, issue 5, No 5, 396-418

Abstract: Abstract We investigate the potential cross-sectional relationship between several equity index attributes and future returns on country-industry indexes in the regions of North America, Europe, Asia-Pacific, South America, MENA, and Japan. Index attributes include the recently documented predictors in the cross-section of stock or index returns such as return range, maximum and minimum returns in a month, idiosyncratic skewness as well as widely documented predictors at the stock level. Maximum and minimum effects are common for all regions. Return range significantly predicts returns in Europe, Asia-Pacific, and South America after controlling for other index attributes. Standard deviation and idiosyncratic volatility have strong predictive ability in Europe, Asia-Pacific, South America, MENA, and Japan. Intermediate term momentum forecasts returns on North American and European portfolios. Earnings-to-price ratio is cross-sectionally linked to returns in Europe. Portfolio sorts show that the predictive power of significant index attributes increases with decreasing index size.

Keywords: Return predictability; International portfolio management; Industrial equity indexes; Cross-section of index returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41260-023-00313-4

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