Momentum Investing on Country Level

Comparable to stock-based momentum?

February 2026. Reading Time: 10 Minutes. Author: Nicolas Rabener.

SUMMARY

  • Momentum-based country investing outperformed the MSCI ACWI
  • However, the outperformance was highly inconsistent
  • The strategy underperformed since the GFC due to strong U.S performance

INTRODUCTION

BlackRock’s iShares launched the International Country Rotation Active ETF (CORO) in December 2024. The fund dynamically rotates across international equity markets and has outperformed the MSCI ACWI ex USA Index to date.

However, its performance history is very short, making the results not particularly meaningful. More importantly, CORO remains the only U.S.-listed ETF or mutual fund that explicitly implements a country rotation strategy – hardly a strong endorsement of the approach’s robustness.

In prior research (read Factor Investing on Country Level), we demonstrated that selecting countries using a stock-like, multi-factor framework could have generated excess returns. That approach, however, required aggregating fundamental metrics across entire equity markets, which is complex and data-intensive. A natural question, then, is whether the strategy can be simplified. Why not focus on momentum, a signal that is straightforward to compute and widely used at the stock level?

In this report, we examine the viability of momentum investing at the country level.

MOMENTUM ON COUNTRY LEVEL

We use data on 23 market capitalization-weighted national equity indices from AQR’s data library. The sample spans 1998 to 2025. Momentum is measured using a simple 12-month lookback period to identify the best-performing markets. Based on this signal, we construct portfolios consisting of the top 3, 6, and 12 countries by past returns, with monthly rebalancing. We ignore transaction costs, but introduce a day of delay for measuring performance.

The best-performing markets since 1998 were Denmark, Norway, and the U.S, while the worst-performing countries were the UK, Portugal, and Japan.

We find that all three momentum-based portfolios would have outperformed both market capitalization–weighted and equal-weighted global equi