Performance of International and Global Equity Mutual Funds: Do Country Momentum and Sector Momentum Matter?

Abstract

This is the first paper analyzing the impact of index momentum factors on the performance of international and global equity funds. Extending an international, index-based version of the Fama and French (1993) three-factor model by adding the factors of country momentum and sector momentum, we find that more than 50% of funds exhibit significant exposure to at least one of these factors. Including both new factors in performance evaluation clearly impacts results when analyzing (i) the risk-adjusted performance, (ii) the performance persistence of funds, and (iii) luck versus skill in the cross-section of funds. Our main results are robust against models which additionally cover a stock-based momentum factor as well as single country, regional and sector factors.

Keywords: International Equity Funds, Global Equity Funds, Country Momentum, Sector Momentum, Fund Performance, Fund Ranking

JEL Classification: G11, G12, G15