Quality Investing and the Cross-Section of Country Returns

Zaremba, Adam

doi:10.2139/ssrn.2372152

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2014

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Cited by 2 publications

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“…The profitability of the "quality strategy" is also confirmed on the country-level instead of stock-level. Zaremba (2014a) finds that stock markets have quality too and that the more profitable and less indebted stock market is as a whole, the better it performs.…”

Section: Introductionmentioning

confidence: 99%

Quality Investing in Cee Emerging Markets

Zaremba

2014

Business, Management and Education

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Using sorting, cross-sectional tests, regression, and tests of a monotonic relation, the study examines the return patterns related to seven distinct quality characteristics: accruals, bid-ask spread, balance sheet liquidity, profitability, leverage, payout ratio and turnover. The investigation of more than 1.300 stocks from 11 Central and Eastern European countries for the period 2002–2014 documents a strong gross-profitability premium and an inverted liquidity premium. Profitable and not heavily leveraged companies provide a partial hedge against market distress. Finally, the paper proposes quality spreads as a forecasting tool and shows that they have predictive abilities over quality premiums related to leverage, profitability and bid-ask spread.

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Section: Introductionmentioning

confidence: 99%