PT  - JOURNAL ARTICLE
AU  - Adam Zaremba
AU  - Mehmet Umutlu
AU  - Andreas Karathanasopoulos
TI  - Opposites Attract: <em>Combining Alpha Momentum and Alpha Reversal in International Equity Markets</em>
AID  - 10.3905/joi.2020.1.120
DP  - 2020 Feb 12
TA  - The Journal of Investing
PG  - joi.2020.1.120
4099  - https://pm-research.com/content/early/2020/02/13/joi.2020.1.120.short
4100  - https://pm-research.com/content/early/2020/02/13/joi.2020.1.120.full
AB  - The authors offer a new integrated framework to combine alpha momentum and alpha reversal into a superior investment strategy for international equity markets. Mixing both effects into a single blended alpha signal forms a stronger country and industry selection method. An equal-weighted strategy that simultaneously goes long the indexes with the highest short-term and the lowest long-term alphas and shorts the ones with the lowest short-term and highest long-term alphas yields monthly three-factor model alphas of 1.16% and 1.44% for countries and industries, respectively. The results are robust to alternative weighting schemes, the effect of trading costs, alternative alpha models, and controlling for popular return predictive variables.TOPICS: Statistical methods, factor-based modelsKey Findings• The article offers a new integrated framework to combine alpha momentum and alpha reversal into a superior investment strategy for international stock markets.• Mixing both effects into a single blended alpha signal forms a stronger country and industry selection method.• The abnormal returns are economically significant and robust to alternative weighting schemes, different alpha models, and controlling for popular return predictive variables.