Global momentum: The optimal trading approach

We investigate momentum strategies in international equity markets. International investors that switch back and forth from one country to the other based on their previous performances can earn more than 2.53% percent per month or 35% per year and momentum effect is substantially strong in emerging markets with returns up to 2.41% per month or 33% per annum. For the international investor, we identify world risk factors, to our knowledge, first time in the literature. We find that higher profits for international momentum portfolios are mainly due to predictability from world macroeconomic risk factors. Notably, the results confirm the informational role of world industrial
production.