Country selection strategies based on quality

Adam Zaremba


The purpose of this paper is to examine country-level parallels of the stock-level anomalies related to quality, i.e. profitability, leverage, liquidity, accruals, payout and turnover. The study uses sorting and cross-sectional tests within a sample of 77 countries over the period of 1999-2014. Markets populated with low-leveraged and cash-rich companies significantly outperform highly leveraged and cash-poor markets, respectively. The both cross-sectional patterns are stronger across small markets than across large ones. Furthermore, additional sorts on leverage and profitability markedly improve performance of cross-national value strategies. Finally, markets with companies with high-cash holdings earn additional premium in times of tight liquidity conditions. Considering the diminishing benefits of international diversification in recent decades, investors should consider the country-level quality strategies in a strategic asset allocation, and not to postpone them to a later stage of the investment process. Furthermore, investments in cash-rich markets provide a hedge against liquidity distress. The first study to comprehensively examine country-level quality effects across global stock markets.
Author Adam Zaremba (WZ / KIiRK)
Adam Zaremba,,
- Department of Investment and Capital Markets
Journal seriesManagerial Finance, ISSN 0307-4358, e-ISSN 1758-7743, (B 10 pkt)
Issue year2015
Publication size in sheets1
Keywords in EnglishLeverage , Country selection strategies , Cross-section of returns , Factor investing , International diversification , Quality investing
ASJC Classification1408 Strategy and Management; 2003 Finance
Languageen angielski
Score (nominal)10
Score sourcejournalList
ScoreMinisterial score = 0.0, 09-06-2020, ArticleFromJournal
Ministerial score (2013-2016) = 10.0, 09-06-2020, ArticleFromJournal
Publication indicators WoS Citations = 8; Scopus SNIP (Source Normalised Impact per Paper): 2015 = 0.592
Citation count*19 (2020-09-10)
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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
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