IDEAS home Printed from https://ideas.repec.org/a/bla/intfin/v21y2018i2p158-174.html
   My bibliography  Save this article

Decomposition of systematic and total risk variations in emerging markets

Author

Listed:
  • Meng‐Horng Lee
  • Chee‐Wooi Hooy
  • Robert Brooks

Abstract

This paper examines the country‐versus‐industry debate in international diversification in the context of systematic risk. We employ the popular decomposition approach proposed by Heston and Rouwenhorst and cover 2,045 individual firms from 36 emerging countries across 39 industries. Generally, we find a domination of country factors in the sample period of 1990–2012, particularly after the 1997 Asian Financial Crisis, which implies that country‐based diversification is still superior to industry‐based diversification in emerging markets. In addition, we document high variability of the common factor coupled with a diminishing trend of country and industry factors, which limits the desired risk reduction from diversification in emerging markets. A convergence between systematic and total risk is found beginning in 2007, which coincides with the timing of the Global Financial Crisis.

Suggested Citation

  • Meng‐Horng Lee & Chee‐Wooi Hooy & Robert Brooks, 2018. "Decomposition of systematic and total risk variations in emerging markets," International Finance, Wiley Blackwell, vol. 21(2), pages 158-174, June.
    • Handle: RePEc:bla:intfin:v:21:y:2018:i:2:p:158-174
    DOI: 10.1111/infi.12127
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/infi.12127
    Download Restriction: no
    File URL: https://libkey.io/10.1111/infi.12127?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:intfin:v:21:y:2018:i:2:p:158-174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.