Country Asset Allocation
Quantitative Country Selection Strategies in Global Factor Investing

Authors: Adam Zaremba, Jacob Shemer



Provides an accessible and critical review of up-to-date literature on factor investing

Offers a practical guide to country-level asset allocation

Presents various portfolio performances based on described investment strategies

This book demonstrates how quantitative country-level investment strategies can be successfully employed to manage money in international markets. It offers a range of state-of-the-art quantitative strategies, describing their theoretical bases, implementation details, and performance in over 70 countries between 1995 and 2015.

International diversification has long been a key to stable investing. However, the increased integration and openness of global financial markets has led to rising correlations between stock market returns in particular countries, driving down the benefits of diversification and increasing the importance of country selection strategies as part of an investment process. Zaremba and Shemer explain the efficiency of quantitative investing, which captures huge amounts of data of limited scope very quickly. In the traditional approach, this data compilation is an immense undertaking, limited in scope and vulnerable to behavioral errors, but this can be overcome with the help of a new paradigm of quantitative investment at the country level. Quantitative country asset allocation can be efficiently accomplished by using wealth insights that have been generated in the academic literature, discovering many anomalies and regular patterns in asset prices. Armed with this information, investors and managers can process large amounts of data more efficiently when deciding to invest in ETFs, index funds, or futures markets.

Table of contents

Front Matter

Introduction

Part I
• Front Matter
• Value Versus Growth: Is Buying Cheap Always a Bargain?
• Trend Is Your Friend: Momentum Investing
• Is Small Beautiful? Size Effect in Stock Markets
• Is Risk Always Rewarded? Low-Volatility Anomalies
• Is Good Company a Good Investment? Quality Investing

Part II
• Front Matter
• Testing the Country Allocation Strategies
• A Short Primer on International Equity Investing
• Value-Oriented Country Selection
• Momentum Effect Across Countries
• Small-Country Effect
• Risk-Based Country Asset Allocation
• Country Selection Based on Quality
• What Next? Combining and Improving Country Selection Strategies
• Conclusions

Back Matter