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

Posted: 26 Oct 2004

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

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. Available at SSRN: https://ssrn.com/abstract=609441

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 the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 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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