Country selection strategies based on quality
AbstractThe 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.
|Journal series||Managerial Finance, ISSN 0307-4358, e-ISSN 1758-7743, (B 10 pkt)|
|Publication size in sheets||1|
|Keywords in English||Leverage , Country selection strategies , Cross-section of returns , Factor investing , International diversification , Quality investing|
|Score|| = 0.0, 09-06-2020, ArticleFromJournal|
= 10.0, 09-06-2020, ArticleFromJournal
|Publication indicators||= 8; : 2015 = 0.592|
|Citation count*||19 (2020-08-03)|
* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.