Style Management in Equity Country Allocation

Strategies that entailed country selection based on relative strength (momentum) posted significant market risk–adjusted returns over the past 30 years, but relative-value strategies based on book value of equity to market value of equity did not. Because these two fixed-style strategies are negatively correlated, using them for style diversification and for style timing (rotation) is potentially rewarding. In the study described here, style diversification enhanced return and lowered risk but style timing provided consistent risk-adjusted performance that was superior to the performance of fixed-style strategies or style diversification.