Strategic returns to international diversification: an application to the equity markets of Europe, Japan, and North America

John Ammer and Jianping Mei
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John Ammer: https://www.federalreserve.gov/econres/john-ammer.htm

No 502, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We undertake a decomposition of the risk factor loadings of fifteen national stock market returns from 1972 to 1990, using a variant of the Campbell-Shiller (1988) linearization. We find considerable variation among countries in the relative importance of a cash flow component and a discount rate component in determining the beta with the world equity index return and with other risk factors. Also, the international heterogeneity we find in factor loadings suggests that a global portfolio allows substantial hedging opportunities, presumably deriving from differences in underlying economic structure.

Keywords: Europe; International finance; Japan; Stock market (search for similar items in EconPapers)
Date: 1995
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Journal Article: Strategic returns to international diversification: An application to the equity markets of Europe, Japan and North America (1995)
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