Sources of Return in Global Investing

Abstract

Traditional approaches to the important sources of return in international equity investing attribute portfolio return to countries and global industries and styles. A new framework shows that these models miss an important component of return that arises from the unique behavior of industries and styles within markets. The answer to the perennial question of international investing? what matters more, country or global industry and style selection??is quite different in developed and emerging markets. The oft–noted spike in the importance of global industries over country influence in 1998?2002 was likely a by–product of the technology bubble. World markets are integrating, but at a very gradual pace.