Building Global Equity Portfolios with Macro Momentum Signals

Summary

This study examines macro momentum across stock markets and its use for timing Chinese equities. It differs from price-based trend following by using macroeconomic indicators to generate signals. For a universe of 24 country equity indexes, it considers growth, inflation, international trade, monetary policy, and risk sentiment. Cross-sectional and time-series readings contribute to direction and long-short scores, which determine portfolio selection and positioning.

The reported monthly backtest spans January 2001 to January 2018. The global long-short portfolio is reported to have a Sharpe ratio of 0.94 and maximum drawdown of 11.75%; several other return figures are missing from the source text. For China, the study tests timing based on global portfolio signals and a domestic four-factor signal using a leading indicator, producer prices, the CFETS currency index, and broad-market excess returns. The reported results favor signal-based timing over holding the broad market, but the summary provides no full methodology or data-handling details. It flags systemic market risk, model failure, and differences between overseas and domestic markets.

Key ideas

• Macro momentum derives trading signals from economic fundamentals rather than only asset prices and volume.
• The global portfolio uses five macroeconomic categories to score country equity indexes.
• Direction scores define long and short asset pools, while selection scores rank assets within those pools.
• The study applies global signals and a domestic four-factor signal to time Chinese equities.
• The reported backtests are historical evidence and do not rule out model failure or market-structure differences.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.