Country versus Region Effects in International Stock Returns

Arbeitspapier

An empirical regularity in the portfolio diversification literature is the importance of country effects in explaining international return variation. We develop a new decomposition that disaggregates these country effects into region effects and within-region country effects. We find that half the return variation typically attributed to country effects is actually due to region effects, a result robust across developed and emerging markets, with the remaining variation explained by within-region country effects. For the average investor, this means that diversifying across countries within Europe, for example, delivers half the risk reduction possible from diversifying across regions globally.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2002-20a

Classification and Topics

• Classification: Wirtschaft
• Subject: Financial markets ; Risk

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brooks, Robin ; Del Negro, Marco
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/100960
• Last update: 10.03.2025, 11:41 AM CET