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 | |
Publication status | Published - Jul 2014 |
Externally published | Yes |
Keywords
- country factor
- emerging stock market
- exchange rate
- inflation rate
- risk-free interest rate
Fingerprint
Dive into the research topics of 'Country factors in stock returns: Reconsidering the basic method'. Together they form a unique fingerprint.Cite this
Bai, Y. (2014). Country factors in stock returns: Reconsidering the basic method. Applied Financial Economics, 24(13), 871-888. https://doi.org/10.1080/09603107.2014.909571