Developed Country Stock ETF Momentum?

“Developed Country Stock Index Momentum?” summarizes a short paper finding that  MSCI developed country stock market indexes may exhibit exploitable momentum since 1970. However, indexes do not include costs of maintaining index-tracking funds, and the availability of such funds may induce market adaptation. Does the specified strategy work for exchange-traded funds (ETF) designed to track the selected indexes? To investigate, we test a momentum strategy that every six months at the ends of June and December:

• Ranks as available 22 developed country stock market ETFs based on past 6-month total returns in U.S. dollars.
• Reforms an equal-weighted portfolio of winners as the half of ETFs with the highest returns (EW Long).

We use the equal-weighted, similarly rebalanced portfolio of all 22 ETFs (EW All, as available) and SPDR S&P 500 ETF (SPY) as benchmarks. Using monthly total returns (including dividends) for the 22 ETFs, including SPY, during March 1996 (earliest available for non-SPY ETFs) through June 2025, we find that: (more…)