Have World, Country and Industry Risk Changed Over Time? An Investigation of the Developed Stock Markets Volatility

42 Pages Posted: 31 Jul 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)

Paulo M. Gama

University of Coimbra

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

This paper uses a volatility decomposition method to study the time series behavior of equity volatility at the world, country and local industry levels. Between 1974 and 2001 there is no noticeable long-term trend in any of the volatility measures. Then in the 1990s, there is a sharp increase in local industry volatility compared to market and country volatility. Thus, correlations among local industries have declined. More assets are needed to achieve a given level of diversification, and there is more of a penalty for not being well diversified by industry. Local industry volatility leads the other volatility measures.

Keywords: Developed markets volatility, industry risk, country risk, international portfolio diversification

JEL Classification: G11, G12, G15, F30

Suggested Citation

Ferreira, Miguel Almeida and Gama, Paulo Miguel, Have World, Country and Industry Risk Changed Over Time? An Investigation of the Developed Stock Markets Volatility (March 2004). AFA 2004 San Diego Meetings. Available at SSRN: https://ssrn.com/abstract=420120 or http://dx.doi.org/10.2139/ssrn.420120

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

Paulo Miguel Gama

University of Coimbra ( email )

Av. Dias da Silva, 165
Coimbra, 3004-512
Portugal
+351 239 790523 (Phone)
+351 239 403511 (Fax)

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