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The cross-sectional variability of stock-price returns: Country and sector effects revisited

Author

Listed:
  • Michael Steliaros

    (FGS Capital LLP)

  • Dylan C Thomas

    (FGS Capital LLP)

Abstract

This paper investigates the impact of countries and sectors as variables in explaining the cross-sectional variability of price returns for a sample of over 1,900 companies comprising the MSCI Developed World Index, drawn from 21 countries, over the period 1992–2001. For the value-weighted world portfolio, the country effect dominates, although the sector effect increases markedly, and the country effect decreases in the post-2000 period. The country effect is, however, much stronger when the largest 300 companies are excluded from the analysis. The same pattern is observed for the portfolio comprising companies from the EMU countries. For equally weighted portfolios, the apparent dominance of the sector effect is largely attributable to the inclusion of the TMT sector. The negative trend in market-wide indices and the volatility experienced at the end of the sample period also account for the assertion that the sector effect has overtaken the country effect in the post-2000 period.

Suggested Citation

  • Michael Steliaros & Dylan C Thomas, 2006. "The cross-sectional variability of stock-price returns: Country and sector effects revisited," Journal of Asset Management, Palgrave Macmillan, vol. 7(3), pages 273-290, September.
    • Handle: RePEc:pal:assmgt:v:7:y:2006:i:3:d:10.1057_palgrave.jam.2240218
    DOI: 10.1057/palgrave.jam.2240218
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    Citations

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    Cited by:

    1. Fedorova, Elena, 2011. "Transfer of financial risk in emerging eastern European stock markets : A sectoral perspective," BOFIT Discussion Papers 24/2011, Bank of Finland, Institute for Economies in Transition.
    2. Liwu Hsu & Susan Fournier & Shuba Srinivasan, 2016. "Brand architecture strategy and firm value: how leveraging, separating, and distancing the corporate brand affects risk and returns," Journal of the Academy of Marketing Science, Springer, vol. 44(2), pages 261-280, March.
    3. Ye Bai & Christopher Green, 2011. "Determinants of cross-sectional stock return variations in emerging markets," Empirical Economics, Springer, vol. 41(1), pages 81-102, August.
    4. repec:zbw:bofitp:2011_024 is not listed on IDEAS
    5. Marcelo, José Luis Miralles & Quirós, José Luis Miralles & Martins, José Luís, 2013. "The role of country and industry factors during volatile times," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 273-290.
    6. Bai, Ye & Green, Christopher J. & Leger, Lawrence, 2012. "Industry and country factors in emerging market returns: Did the Asian crisis make a difference?," Emerging Markets Review, Elsevier, vol. 13(4), pages 559-580.
    7. Joliet, Robert & Hubner, Georges, 2008. "Corporate international diversification and the cost of equity: European evidence," Journal of International Money and Finance, Elsevier, vol. 27(1), pages 102-123, February.
    8. Fedorova, Elena, 2011. "Transfer of financial risk in emerging eastern European stock markets: A sectoral perspective," BOFIT Discussion Papers 24/2011, Bank of Finland Institute for Emerging Economies (BOFIT).

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