And the Winner Is… A Comparison of Valuation Measures for Equity Country Allocation

Adam Zaremba , Jan Jakub Szczygielski

Abstract

The authors evaluate and compare the usefulness of various valuation ratios for equity country allocation. To this end, the performance of 73 national equity indexes is investigated for the period 1996 to 2017. The earnings before interest, tax, depreciation, and amortization (EBITDA)-to-enterprise value (EV) multiple is the best predictor of performance and outperforms other metrics. An equal-weighted portfolio that is long (short) in the tertile of countries with the highest (lowest) EBITDA-to-EV ratio produces a mean monthly return of 0.69% and a Sharpe ratio of 0.81, which is more than double the Sharpe ratios obtained from using traditional metrics such as the book-to-market ratio or dividend yield. Two major drawbacks of intercountry value strategies are identified: (1) payoffs are derived predominantly from emerging and frontier markets and (2) profitability has significantly declined in the last decade.
Author Adam Zaremba (WZ / KIiRK)
Adam Zaremba,,
- Department of Investment and Capital Markets
, Jan Jakub Szczygielski - University of Pretoria, Pretoria, South Africa
Jan Jakub Szczygielski ,,
-
Journal seriesJournal of Portfolio Management, ISSN 0095-4918, e-ISSN 2168-8656, (N/A 70 pkt)
Issue year2019
Vol45
No5
Pages84-98
Publication size in sheets0.7
Keywords in Polishwycena aktywów, międzynarodowe rynki finansowe, strategie inwestycyjne
Keywords in Englishasset pricing, international financial markets, investment strategies
ASJC Classification1400 General Business, Management and Accounting; 1402 Accounting; 2002 Economics and Econometrics; 2003 Finance
DOIDOI:10.3905/jpm.2019.45.5.084
URL https://jpm.pm-research.com/content/45/5/84
Languageen angielski
Score (nominal)70
Score sourcejournalList
ScoreMinisterial score = 70.0, 08-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 1; Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.778; WoS Impact Factor: 2017 = 0.812 (2) - 2017=0.887 (5)
Citation count*5 (2020-09-10)
Cite
Share Share

Get link to the record


* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
Back
Confirmation
Are you sure?