Firms' Exposures to Geographic Risks

Bernard Dumas (), Tymur Gabuniya and Richard C Marston

No 15503, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The distinction between domicile and place of business is becoming more and more relevant as a growing number of firms have activities abroad. In most statistical studies of international stock returns, a firm is included in a country's index if its headquarters are located in that country. This classification scheme ignores the operations of the firm. We propose, instead, to measure the firm's exposures to "geographic zones" according to the place where they conduct business. As a representation of "geographic risks", we synthesize zone factors from all firms in the dataset, be they domestic firms or multinationals. And we show the properties of the exposures to the zone factors.

Keywords: Stock return indexes; Stock return exposures; Geographic investing; Factor models; Country factors; Expectations-maximization algorithm (search for similar items in EconPapers)
JEL-codes: C4 F3 F6 G1 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-rmg and nep-ure
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Working Paper: Firms' Exposures to Geographic Risks (2020)
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