Sources Of Variability In Global Equity Returns

Abstract

This study examines basically major geographical sources of global returns and risks. The focus is on the relevance of global, regional and national allocation policies. Additionally, the significance of value-growth allocation policy is also analyzed. The empirical analysis covers major developed equity markets, and it is conducted within the framework of the international capital asset pricing model. Our findings show that although the global systematic risk is getting to be a fundamental determinant of global equity returns and risks, country and, particularly, region selection are still important. Global and regional risk together can explain at least two-thirds of the total variability of equity returns in the majority of developed markets. However, the results of this study indicate a trivial effect for the value-growth allocation policy.