And the Winner Is... A Comparison of Valuation Measures for Equity Country Allocation

Adam Zaremba, Jan Jakub Szczygielski

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)


The authors evaluate and compare the usefulness of various valuation ratios for equity country allocation. To this end, the performance of 73 national equity indexes is investigated for the period 1996 to 2017. The earnings before interest, tax, depreciation, and amortization (EBITDA)-to-enterprise value (EV) multiple is the best predictor of performance and outperforms other metrics. An equal-weighted portfolio that is long (short) in the tertile of countries with the highest (lowest) EBITDA-to-EV ratio produces a mean monthly return of 0.69% and a Sharpe ratio of 0.81, which is more than double the Sharpe ratios obtained from using traditional metrics such as the book-to-market ratio or dividend yield. Two major drawbacks of intercountry value strategies are identified: (1) payoffs are derived predominantly from emerging and frontier markets and (2) profitability has significantly declined in the last decade.
Original languageEnglish
Pages (from-to)84-98
JournalJournal of Portfolio Management
Issue number5
Publication statusPublished - 1 Jul 2019
Externally publishedYes


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