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Global Country Allocation Strategies

In this report, we investigate the efficacy of fundamental, macroeconomic and sentiment-based strategies for country selection across global equity markets. Using point-in-time fundamental and macroeconomic data, we constructed signals at the country level, grouped into five themes: valuation, quality, sentiment, volatility and macro. We examined their performance between January 1999 and November 2014 for the developed and emerging markets in the S&P Global Broad Market Indices.

Our major findings include:

  • Valuation is a common driver of performance in both developed and emerging markets.
  • In addition to valuation, we found macro and sentiment based indicators to be effective country selection signals in developed markets.
  • We found currency depreciation to be important when emerging market countries were separated into exporting and importing nations.
  • Valuation and profitability are low-turnover strategies while macro and sentiment indicators tend to result in more frequent rotation among countries.

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S&P Capital IQ Quantamental Research Global Country Allocation Strategies