European Parliament Library

A Latent Factor Model with Global, Country, and Industry Shocks for International Stock Returns, Marco Del Negro, Robin Brooks

Contributor
Abstract
We estimate a latent factor model that decomposes international stock returns into global, country-, and industry-specific shocks and allows for stock-specific exposures to these shocks. We find that across stocks there is substantial dispersion in these exposures, which is partly explained by the extent to which firms operate across countries. We show that portfolios consisting of stocks with low exposures to country shocks achieve substantial variance reduction relative to the global market, both in- and out-of-sample. The shock exposures are thus a stock-selection device for international portfolio diversification
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. THE MODEL""; ""III. THE DATA""; ""IV. RESULTS""; ""A. Firm-Level Heterogeneity in the Exposures to Global, Country, and Industry Shocks""; ""B. What Are Stock-Specific Exposures Capturing?""; ""C. Diversification Strategies Using Stock-Specific Exposures""; ""D. Variance Decomposition Results and Robustness Tests""; ""V. CONCLUSION""; ""References""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (35 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9786613800602

Library Locations

  • EP Library Luxembourg

    Rue du Fort Thüngen, Luxembourg, L-1313, LU
    Borrow
  • EP Library Strasbourg

    7 Place Adrien Zeller, Allée du Printemps, Strasbourg, F-67070, FR
    Borrow
  • EP Library Brussels

    60 rue Wiertz, Brussels, B-1047, BE
    Borrow