Domicile Matters: Backtest of Performance by Equal-Weight Country Index

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Domicile Matters: Backtest of Performance by Equal-Weight Country Index

Domicile Matters: Backtest of Performance by Equal-Weight Country Index

By: greenbackd

Great op ed article by Jerry Bowyer at Forbes called When Investing, Pay Close Attention To Country Over Company examining the relative importance of country indices over sector or stock indices for the period 1989 to last Fall. Here’s the method:

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Lattice Strategies compared portfolios consisting of: a range of country stock indices weighted by capitalization; the same countries weighted equally, a broad range of countries’ stock weighted by sector; the S&P 500, the S&P 500 weighted by sectors and the S&P 500 with each stock weighted equally.

The findings point to the equally weighted country index (in red) being the clear winner:

The equally weighted country index was the clear outlier, demonstrating that at least as far as this time period shows (the only one with comprehensive individual country data available), greater value would have been added (or potentially subtracted) by deviating from index country weights than by deviating from index sector or stock weights. One thousand dollars invested in equal weightings of the country indices becomes almost five thousand dollars as of last fall, while the S&P would put you closer to fifteen hundred. Equal weighting of S&P stocks gets you closer to two thousand.

Bowyer concludes:

The evidence seems quite clear. Countries matter – a lot.

Read When Investing, Pay Close Attention To Country Over Company.

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My name is Tobias Carlisle. I am the founder and managing member of Eyquem Investment Management LLC, and portfolio manager of Eyquem Fund LP. Eyquem Fund LP pursues a deep value, contrarian, Grahamite investment strategy based on the research featured in Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (hardcover, 288 pages, Wiley Finance, December 26, 2012), and discussed on Greenbackd. I have extensive experience in activist investment, company valuation, public company corporate governance, and mergers and acquisitions law. Prior to founding Eyquem, I was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions I have advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam, ranging in value from $50 million to $2.5 billion. I am a graduate of the University of Queensland in Australia with degrees in law and business (management). Contact me I can be contacted at greenbackd [at] gmail [dot] com. I welcome all feedback. Connect on LinkedIn, where we’re Friends.

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