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

Posted: 20 Apr 2005

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

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Abstract

Most empirical studies find that country effects are larger than industry effects in stock returns, although industry effects have gained in importance recently. Our results support 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 effect relative to country effect in the 1990s. In fact, industry effects is similar in magnitude to country effect in the post-euro period. The evolution of the ratio of country to industry effect is explained by the decrease in the cross-sectional variance of interest rate movements across EMU countries. Thus, there is evidence that nominal convergence has reduced the differences between 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. European Financial Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=700902

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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