RT Journal Article
SR Electronic
T1 Country versus Region Effects in International Stock Returns
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 67
OP 72
DO 10.3905/jpm.2005.570152
VO 31
IS 4
A1 Robin Brooks
A1 Marco Del Negro
YR 2005
UL https://pm-research.com/content/31/4/67.abstract
AB An empirical regularity in the portfolio diversification literature is the importance of country effects in explaining international return variation. A new decomposition here disaggregates these country effects into region effects and within-region country effects. Half of the return variation typically attributed to country effects seems attributable actually to region effects, a result robust across developed and emerging markets; the remaining variation is 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.