Country Risk and Expected Returns Across Global Equity Markets

Adam Zaremba


Assessing and pricing country risk poses a considerable challenge to tactical asset allocation across national equity markets. This research examines the relationship between the country composite risk (together with its component risks related to sovereign credit, currency, banking sector, economic structure, and political situation) and expected returns, also identifying general implications for international investors. An equal-weighted portfolio of risky countries outperforms safe countries by approximately 0.50 percentage points per month. The application of this cross -sectional pattern, however, still poses a significant challenge for investment practice. The abnormal performance proves insignificant for capitalization-weighted and liquidity-weighted portfolios as well as within the subgroups of the full sample. Also, we observe that the profitability of the risk-based strategies has disappeared in the years following the global financial crisis.
Author Adam Zaremba (WZ / KIiRK)
Adam Zaremba,,
- Department of Investment and Capital Markets
Journal seriesFinance A Uver-Czech Journal of Economics and Finance, ISSN 0015-1920, (A 15 pkt)
Issue year2018
Publication size in sheets1.2
Keywords in Englishcountry risk, sovereign risk, political risk, currency risk, banking sector risk, economic risk, country asset allocation, country selection strategies, return predictability, international asset pricing, cross - section of returns, international diversification
ASJC Classification1402 Accounting; 2002 Economics and Econometrics; 2003 Finance
Languageen angielski
Score (nominal)15
Score sourcejournalList
ScoreMinisterial score = 15.0, 27-03-2020, ArticleFromJournal
Publication indicators WoS Citations = 0; Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.527; WoS Impact Factor: 2017 = 0.563 (2) - 2017=0.631 (5)
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