Another Look at the Role of the Industrial Structure of Markets for International Diversification Strategies

THE CHARLES A. DICE CENTER FOR RESEARCH IN FINANCIAL ECONOMICS

29 Pages Posted: 28 Feb 1996

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

George Andrew Karolyi

Cornell University - SC Johnson College of Business

Abstract

This paper re-examines the extent to which gains to international diversification are due to differences in industrial structure across countries. Recent papers by Roll (1992) and Heston and Rouwenhorst (1994) investigate this issue and find conflicting evidence. Using a new database, the Dow Jones World Stock Index, with coverage in 25 countries and over 66 industry classifications, we are able to decompose comprehensively both country and industrial sources of variation. We confirm the previous finding that little of the variation in country index returns can be explained by their industrial composition. We also uncover differences in the proportion of variation in industry index returns that is captured by country and industry factors. The implications for global diversification strategies are discussed.

JEL Classification: G12, G15

Suggested Citation

Griffin, John M. and Karolyi, George Andrew, Another Look at the Role of the Industrial Structure of Markets for International Diversification Strategies. THE CHARLES A. DICE CENTER FOR RESEARCH IN FINANCIAL ECONOMICS, Available at SSRN: https://ssrn.com/abstract=40557 or http://dx.doi.org/10.2139/ssrn.40557

John M. Griffin (Contact Author)

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

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

George Andrew Karolyi

Cornell University - SC Johnson College of Business ( email )

174A STATLER HALL
ITHACA, NY 14853
United States
6142820229 (Phone)

HOME PAGE: http://https://www.johnson.cornell.edu/faculty-research/faculty/gak56/

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