The importance of dividend yields in country selection

Given the positive correlation between dividend yields and portfolio returns, the challenge for the global equity investor is to find ways of exploiting this market inefficiency in the construction of global equity portfolios. Tests are performed to show that it is possible to increase the chances o...

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Bibliographic Details
Published inJournal of portfolio management Vol. 17; no. 2; pp. 24 - 29
Main Author Keppler, A Michael
Format Journal Article
LanguageEnglish
Published London Pageant Media 01.01.1991
Subjects
Dividends
Equity
International
Portfolio investments
Portfolio management
Rates of return
Studies
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Summary:Given the positive correlation between dividend yields and portfolio returns, the challenge for the global equity investor is to find ways of exploiting this market inefficiency in the construction of global equity portfolios. Tests are performed to show that it is possible to increase the chances of beating global stock market indexes by concentrating global equity investments in markets with above-average dividend yields. A number of buy-and-sell strategies are tested with hypothetical portfolios consisting of individual national country indexes over the 20-year period ending in December 1989. The study shows that global equity investors can achieve excess risk-adjusted returns over the long term by investing in markets with above-average dividend yields. While dividend yields are only one of several useful criteria for country selection decisions, when combined with other variables, this criterion is a valuable tool for enhancing the returns of global equity portfolios.
ISSN:0095-4918
2168-8656
DOI:10.3905/jpm.1991.409327