01874cas a2200253 a 4500 AALejournalIMF002315 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451847277 1018-5941 BD-DhAAL BD-DhAAL Catao, Luis. Country and Industry Dynamics in Stock Returns / Luis Catao, Allan Timmermann. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (51 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students A perennial question in international finance is to what extent stock returns are influenced by country-location, as opposed to industry-affiliation, factors. This paper develops a novel methodology to measure these effects, in which portfolios mimicking "pure" country and industry factors are first constructed and their joint dynamics then modeled as regime-switching processes. Estimation using global firm-level data allows us to identify well-defined volatility states over the past thirty years and shows that the contribution of the industry factor becomes systematically more prominent during high global volatility states, while the country factor contribution declines. Using the model's estimates, we find that portfolio diversification possibilities vary considerably across economic states. Mode of access: Internet Timmermann, Allan. IMF Working Papers; Working Paper ; No. 2003/052 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/052/001.2003.issue-052-en.xml IMF e-Library