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| Tekijä: | Moor, L. de Sercu, P. |
| Otsikko: | Country v sector effects in equity returns and the roles of geographical and firm-size coverage |
| Lehti: | Small business economics
2010 : NOV, VOL. 35:4, p. 433-448 |
| Asiasana: | stocks rate of return funds companies emerging markets diversification small business |
| Kieli: | eng |
| Tiivistelmä: | Since Roll (The Journal of Finance 47(1):3-41, 1992) and Heston and Rouwenhorst (Journal of Financial Economics 36:3-27, 1994), a debate has existed of whether country factors in international stock returns are typically more variable than sector factors. The addition of emerging markets (EMs) boosts the ratio of country-factor variance relative to industry-factor variance as these have a higher variability, but have also diminished relation to global factors. Investigating to what extent this phenomenon can be tracked down to the effect of adding more small firms, the following is found: Small firms (1) have higher volatility, but only when controlling for country and sector affiliation. (2) have weaker sector affinity, as expected. (3) unexpectedly are less sensitive to local markets than large firms. Facts (2) and (3) imply that adding more small firms to the data base diversifies both the sector- and country-factor variance; while the impact on sector variance is larger, the net effect appears to be tiny. (4) Addition of emerging markets has a very marked impact on the variance ratio. In fact, the addition of small stocks to the sample hardly weakens the effect of adding EMs. Thus, the role of EMs cannot be just a small-firm phenomenon. |
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