The Importance of Industry and Country Effects in the Emu Equity Markets

42 Pages Posted: 27 May 2003

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Miguel Angelo Ferreira

Banco Comercial Portugues

Multiple version iconThere are 3 versions of this paper

Date Written: March 2004

Abstract

Most empirical studies find that country effects are larger than industry effects in stock returns, although industry effects are gaining importance in recent times. Our results confirm the dominance of country effects relative to industry and common effects in the EMU equity markets in the 1975-2001 period. However, there is an increasing importance of industry effects relative to country effects in the 1990s. In fact, industry effects present similar magnitude than country effects in the 1999-2001 period. The evolution of the ratio of country to industry effects is explained by the decrease in the cross-sectional variance of interest rate and exchange rate movements across EMU countries. Thus, there is evidence that nominal convergence has reduced the differences among national equity markets.

Keywords: International equity markets, Diversification; Volatility, EMU

JEL Classification: G11, G15

Suggested Citation

Ferreira, Miguel Almeida and Ferreira, Miguel Angelo, The Importance of Industry and Country Effects in the Emu Equity Markets (March 2004). Available at SSRN: https://ssrn.com/abstract=392640 or http://dx.doi.org/10.2139/ssrn.392640

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Miguel Angelo Ferreira

Banco Comercial Portugues ( email )

Lisboa
Portugal

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