Style key to global equity fund returns: CIFR

Style key to global equity fund returns: CIFR

Investment style has a significant effect on the returns of global equity funds, according to the Centre for International Finance and Regulation (CIFR).


After analysing the performance of stocks from 36 countries representing 28 different currencies between 2002 and 2012, CIFR found several style factors that provided “opportunities to earn superior returns from global equities”.

These six style factors included investment in smaller stocks, companies with higher return-on-equity, businesses growing their assets, less liquid stocks, and companies with higher book-to-market and cash-flow-to-price ratios.

CIFR also included momentum investing, or “basing investment decisions on movements in a stock’s price, rather than on fundamentals” in this list, despite this method offering “no significant return premium” during the duration of the study.

“This was atypical and attributable to the poor performance of this style of investing during the global financial crisis in 2009," the firm said.

Additionally, currency factors such as increasing currency returns, interest rate differentials, and value based on purchasing power parity deviation affected global equity returns at a similar level.

“The study finds that the six equity style factors and three currency factors are all important in explaining variability in stock returns and the performance of global equity funds," CIFR said.

"It suggests that investors should consider tailoring their investment strategies to take advantage of the return premiums identified."

Read more:

Bigger isn't always better, warns Tria

US robo-advice AUM surging: BlackRock

ASIC bans alternative investment spruiker

Willis Towers Watson names new Australasian head

Fed likely to raise funds rate in September

 

 

Style key to global equity fund returns: CIFR
investordaily image
ID logo
promoted stories

Appointments

investordaily image

Fortnum hires former Centric Wealth CEO

Staff Reporter

Deborah Ralston

SMSF Association names new chair

Katarina Taurian

Curtis Cifuentes

Avenir Capital hires investment director

Staff Reporter

Analysis

Maurizio Canton

Striking a balance between security and innovation

Maurizio Canton

Greg Kuhnert

Backing China in the Year of the Dog

Greg Kuhert

investordaily image

The benefits of good data governance

Steve Singer