Triage in a Global Financial Crisis: Countries, Sectors, or Stocks?

Abstract

This research presents new empirical evidence that country allocation decisions are the determining factor of international equity funds’ excess returns, even during a global financial crisis. One hundred equity mutual funds are examined during the turbulent years of 2007–2013, and results show that country allocation is the primary determinant of deviation of an international equity fund’s return from a benchmark return. For emerging market funds, country allocation decisions are especially important during this period. This result provides the foundation and motivation for further research into factors that differentiate country-level equity returns.

TOPICS: Equity portfolio management, exchange-traded funds and applications, global