Performance of separately managed international equity accounts: How important are country momentum effects?

We analyze the performance of international equity SMAs over 1986-2003. We find that performance persists at both the country and individual SMA level. Best performing countries continue to outperform and best performing SMAs continue to outperform, even after controlling for market, firm size, and book-to-market factor exposures. We find that country momentum is a key determinant of international equity SMA performance. The difference in performance between the prior best and worst performing SMAs is slashed in half after controlling for country momentum effects.