Should You Tilt Your Equity Portfolio to Smaller Countries?

Posted: 19 Dec 2017 Last revised: 22 May 2019

See all articles by Gregg S. Fisher

Gregg S. Fisher

Fisher Family Ventures

Ronnie Shah

Deutsche Bank; University of Texas at Austin - Department of Finance

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: September 1, 2017

Abstract

In this article, the authors examine the relation between country size, measured as the aggregate market capitalization of the listed stocks in a country, and individual stock returns. They find that stocks from small countries tend to have higher average returns than stocks from large countries. The country size effect is largely independent of the firm size effect and other country quantitative factors such as book-to-market and momentum. The authors conjecture that the country size effect is due to home bias and provide mixed evidence in support of this conjecture.

Suggested Citation

Fisher, Gregg S. and Shah, Ronnie and Titman, Sheridan, Should You Tilt Your Equity Portfolio to Smaller Countries? (September 1, 2017). https://doi.org/10.3905/jpm.2017.44.1.127. Available at SSRN: https://ssrn.com/abstract=3088220 or http://dx.doi.org/10.2139/ssrn.3088220

Gregg S. Fisher (Contact Author)

Fisher Family Ventures ( email )

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HOME PAGE: http://www.fisherfamilyventures.com

Ronnie Shah

Deutsche Bank ( email )

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New York, NY 10017
United States

HOME PAGE: http://www.db.com

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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