1. For a review of the evidence and theories underpinning the value phenomenon in global markets, see for instance Asness, Moskowitz, and Pedersen (2013), Baz et al. (2017), and Brightman and Shepherd (2017).
2. This series is from the Kenneth French data library.
3. Specifically, when the current CAPE ratio is greater than its trailing 30-year average, this portfolio is bearish and invests $0.50 in cash by short selling an equivalent amount of the stock market; in the opposite scenario, the portfolio is bullish and invests $0.50 in the stock market by borrowing this amount at the cash rate. This is a simplified version of the broader analysis proposed by Aked, Shakernia, and Mazzoleni (2017).
4. The countries included in our analysis are Australia, Canada, Germany, France, Italy, Japan, the Netherlands, the United Kingdom, the United States, Sweden, Spain, and Hong Kong.
5. Of course, our simple HML and CAPE portfolios are meant to be illustrative, and readers should not conclude that these types of timing strategies are doomed to underperform going forward or cannot be improved. For instance, we refer readers to Aked, Mazzoleni, and Shakernia (2017) and Arnott, Kalesnik, and Masturzo (2018).
6. The countries included in our analysis are Australia, Canada, Germany, France, the United Kingdom, Japan, the United States, and Italy.
7. Diversifying across factors is an observation that does not need to be limited to the value factor; for more on this topic, we recommend Aked et al. (2017).
8. The currency portfolio is built from the perspective of a US investor, and the foreign countries included in our analysis are Australia, Canada, Germany/Eurozone, Japan, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom. The contracts included are Corn, Brent Crude, Cocoa, WTI Crude, Cotton, Feeder Cattle, Gold, Heating Oil, Coffee, Kansas Wheat, Aluminum, Live Cattle, Gasoil, Lean Hogs, Lead, Nickel, Copper, Zinc, Natural Gas, Gasoline, Soybeans, Sugar, Silver, and Wheat.
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