The Cross-Sectional Variability of Stock-Price Returns: Country and Sector Effects Revisited
Michael E. Steliaros
Merrill Lynch & Co.
Dylan C. Thomas
Swansea University - Department of Business & Economics
March 3, 2006
Cass Business School Research Paper
We investigate the impact of country and sector as variables in explaining the cross-sectional variability of price returns for a sample of over 1900 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.
Number of Pages in PDF File: 32
Keywords: Country effects, sector effects, cross sectional variability of share-price returns
JEL Classification: F30, G11, G12, G15working papers series
Date posted: March 10, 2006
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