Country factors in stock returns: Reconsidering the basic method

Y. Bai

doi:10.1080/09603107.2014.909571

Country factors in stock returns: Reconsidering the basic method

Y. Bai^*

^*Corresponding author for this work

University of Nottingham

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

Many studies show that country effects dominate in determining the stock return cross-sectional variations. After removing three potential distortions (domestic inflation rate, exchange rate and local risk-free interest rate), we find that the common practice of decomposing the nominal return converted into a single currency misestimates the importance of country effects, and hence may lead to incorrect inferences regarding portfolio diversification.

Original language	English
Pages (from-to)	871-888
Number of pages	18
Journal	Applied Financial Economics
Volume	24
Issue number	13
DOIs	https://doi.org/10.1080/09603107.2014.909571
Publication status	Published - Jul 2014
Externally published	Yes

Keywords

country factor
emerging stock market
exchange rate
inflation rate
risk-free interest rate

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10.1080/09603107.2014.909571

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Country factors in stock returns: Reconsidering the basic method

Abstract

Keywords

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