Samuel Lee has a great article “The Hedgehog’s Error” on Morningstar that does a simple quant sorting of global countries based on value (P/B). Not surprisingly he finds that sorting on value, aka buy low sell high, works. More importantly he unveils a database of French Fama international data on a country level basis that I previously had not seen and that costs $10,000 plus elsewhere. Huge find!:
I’ve reproduced the results of a classic price/book sorting strategy applied to country indexes. The country-level stock market and price/book data come from the French Data Library. The strategy is simple: At the end of each December, sort country equity markets by their price/book ratios. Buy in equal weights the six with the lowest ratios (the cheapest markets); short in equal weights the six with the highest ratios (the most expensive markets). Rebalance monthly. The strategy produced an excess return of 4.42% annualized for the period 1976–2011. With Europe trading at depressed valuation ratios, mean reversion suggests that the region is poised for long-run outperformance.