Browsing by Author "Zaremba, Adam"

Now showing 1 - 8 of 8

Citation - WoS: 13
Citation - Scopus: 13
Alpha momentum and alpha reversal in country and industry equity indexes
(ELSEVIER, 2019) Adam Zaremba; Mehmet Umutlu; Andreas Karathanasopoulos; Karathanasopoulos, Andreas; Zaremba, Adam; Umutlu, Mehmet
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.
Decomposing the earnings-to-price ratio and the cross-section of international equity-index returns
(ROUTLEDGE JOURNALS TAYLOR & FRANCIS LTD, 2021) Mehmet Umutlu; Pelin Bengitoz; Adam Zaremba; Bengitöz, Pelin; Zaremba, Adam; Umutlu, Mehmet
We examine whether components of the earnings-to-price (EP) ratio can be used to extract incremental information to better estimate future returns in the cross-section of country-industry indexes. We demonstrate that the EP components such as lagged EP changes in earnings short-term momentum and long-term reversal in prices increase the accuracy of return forecasts. The EP decomposition matters in developed markets but is pointless in emerging countries. The results are robust to modifications in the methodology sub-period analyses the use of an alternative sample and remain unchanged after controlling for net share issuance size and fixed country and time effects.
Citation - WoS: 8
Citation - Scopus: 10
Less pain more gain: Volatility-adjusted residual momentum in international equity markets
(Taylor and Francis Ltd. michael.wagreich@univie.ac.at, 2018) Adam Zaremba; Mehmet Umutlu; Alina Maydybura; Maydybura, Alina; Zaremba, Adam; Umutlu, Mehmet
We offer a new type of momentum strategy — the volatility-adjusted residual momentum (VARMOM) — which is based on average past residuals scaled with their volatility. We demonstrate its application for international asset allocation within 51 country indexes and 888 industry portfolios from developed and emerging markets. The VARMOM trading strategy notably outperforms and subsumes a standard momentum strategy delivering Sharpe ratios that are two to three times higher. The VARMOM is particularly strong across portfolios characterised by high limits to arbitrage and following bull markets supporting the behavioural explanation of momentum. The results are robust to alternative portfolio construction methods as well as the inclusion of trading costs and control variables. They are also valid for several subperiods and subsamples. © 2018 Elsevier B.V. All rights reserved.
Citation - WoS: 4
Citation - Scopus: 4
Market segmentation and international diversification across country and industry portfolios
(ELSEVIER, 2023) Mehmet Umutlu; Seher Goren Yargi; Adam Zaremba; Yargi, Seher Goren; Zaremba, Adam; Umutlu, Mehmet
We conjecture that partially segmented stock indexes that are characterized by low correlation with the world market are mainly priced by local factors and should produce abnormal returns relative to a global asset-pricing model. This implies a negative relation between correlation and future index returns in the presence of segmented indexes. Empirical evidence confirms such a relationship for the sample of industry indexes suggesting a heterogeneous segmentation. However we do not observe a similar pattern for country indexes. In addition the international diversification potential of industries does not vanish during volatile periods. The hypothesis that the negative relationship should be stronger for the more segmented subsamples that are char-acterized by small market size and emerging country origin is verified for the industry sample. Thus cross-industry diversification is superior to mere cross-country diversification.
Opposites Attract: Combining Alpha Momentum and Alpha Reversal in International Equity Markets
(PAGEANT MEDIA LTD, 2020) Adam Zaremba; Mehmet Umutlu; Andreas Karathanasopoulos; Karathanasopoulos, Andreas; Zaremba, Adam; Umutlu, Mehmet
The authors offer a new integrated framework to combine alpha momentum and alpha reversal into a superior investment strategy for international equity markets. Mixing both effects into a single blended alpha signal forms a stronger country and industry selection method. An equal-weighted strategy that simultaneously goes long the indexes with the highest short-term and the lowest long-term alphas and shorts the ones with the lowest short-term and highest long-term alphas yields monthly three factor model alphas of 1.16% and 1.44% for countries and industries respectively. The results are robust to alternative weighting schemes the effect of trading costs alternative alpha models and controlling for popular return predictive variables.
Citation - WoS: 12
Citation - Scopus: 13
Size matters everywhere: Decomposing the small country and small industry premia
(Elsevier Inc. usjcs@elsevier.com, 2018) Adam Zaremba; Mehmet Umutlu; Zaremba, Adam; Umutlu, Mehmet
We explore the country and industry size effects by decomposing market value into four components: short-term return representing momentum, long-run return representing reversal, composite issuance, and lagged market value. We examine the implications of this decomposition for the country and industry size premia within a sample of 51 equity markets for the years 1973–2017. We confirm a significant size effect across countries and uncover an industry size effect: small industries markedly outperform large industries. While the cross-sectional dispersion in market value is determined almost exclusively by the lagged market value component the country and industry size premia have two prmary drivers: lagged market value and long-run reversal. Our analysis also discovers an industry issuance effect and a remarkable January effect inboth country and industry returns. Finally we also shed some light on the vanishing small country effect in the last decade. © 2018 Elsevier B.V. All rights reserved.
Citation - WoS: 6
Citation - Scopus: 7
Strategies can be expensive too! The value spread and asset allocation in global equity markets
(ROUTLEDGE JOURNALS TAYLOR & FRANCIS LTD, 2018) Adam Zaremba; Mehmet Umutlu; Zaremba, Adam; Umutlu, Mehmet
Is the value spread useful for forecasting returns on quantitative equity strategies for country selection? To test this we examine a sample of 120 country-level equity strategies replicated within 72 stock markets for the years 1996-2017. The value spread is a powerful and robust predictor of strategy returns in the cross-section subsuming other methods based on momentum reversal or seasonality. Going long (short) the strategies with the broadest (narrowest) value spread produces significant four-factor model alphas markedly outperforming an equal-weighted benchmark of all of the strategies. The results are robust to many considerations.
Citation - WoS: 32
Citation - Scopus: 36
Where have the profits gone? Market efficiency and the disappearing equity anomalies in country and industry returns✰
(Elsevier B.V., 2020) Adam Zaremba; Mehmet Umutlu; Alina Maydybura; Maydybura, Alina; Zaremba, Adam; Umutlu, Mehmet
We are the first to demonstrate the decline in the cross-sectional predictability of country and industry returns in recent years. We examine 53 anomalies in country and industry indices from 64 markets for the years 1973–2018. The profitability of the strategies has significantly decreased recently driven particularly by the disappearance of value and reversal effects. The phenomenon is strongest in large developed markets. Neither changes in country- and industry-specific risks nor investor learning from the academic literature can explain the effect. Our findings support the view that the fall in return predictability is caused by the overall improvement in market efficiency. © 2020 Elsevier B.V. All rights reserved.