This article investigates the link between momentum-based trading strategies implemented in global equity markets and country-specific credit ratings. The findings indicate that only the momentum strategy based on intermediate past returns generate statistically significant profits. Notably, the...

An advantageous statistical arbitrage strategy should exhibit a zero-cost trading strategy for which the expected payoff should be positive. In practical applications, however, the abnormal returns often are out-of-sample not significant. The statistical model being suggested here results in an...

We investigate the causality between the real federal budget deficit returns and real stock market returns for the US economy. We divide the overall sample into two sub-samples running from 1968:1 to 1988:3 and from 1988:4 to 2011:3. In contrast to earlier studies, we find a significant positive...

This paper studies the asset allocation decision in the presence of regime switching in stock market returns. The analysis is based on two stock indices: DJI 30 and OMX 30. The two-step optimization procedure employed points towards the usage of defensive asset allocation strategies under bear...

In this study volatility spillover effects in preselected cointegrated European stock markets are investigated. The data generating processes are estimated by applying Vector-Auto Regression (VAR) models. Thereby, the impacts of volatility spillovers are measured by a new concept being denoted...

Passive portfolio management which aims to replicate a stock index faces basically two different optimization methods. Traditional portfolio management employs historical stock return data of preselected stocks in order to replicate the underlying stock index. The cointegration method employs...

The following contribution analyzes linkages between preselected national stock markets by a multivariate application of Markov-Switching models. This study shows evidence that the US-stock market and the German and Swedish stock markets are driven by the same unobservable stochastic variable....

This article investigates the relation of idiosyncratic volatility (IVOL) and future returns on a portfolio level in global equity markets. In contrast to previous studies (Ang <italic>et al.</italic> 2006, 2009), it reveals that the spread between stock indices exhibiting a high IVOL and stock indices with low...

This paper investigates the profitability of momentum-based trading strategies pursued during the most recent economic downturns in global equity markets. In contrast to previous studies, it reveals that such strategies generated statistically significant negative returns during the most recent...

This study examines the volatility spillovers between the foreign exchange rate markets of three of the USA’s major trading partners and the US stock market, utilizing the forecast-error variance decomposition framework of a VAR model proposed by Diebold and Yilmaz (2009). The empirical...