The importance of country versus sector characteristics
Abstract
Does a company’s country of incorporation or the sector of its activity have a greater influence on the equity returns its shareholders earn? This question has been examined extensively using dummy variable regressions or factor models on pre‐determined characteristics; nevertheless, the results are inconclusive and vary with the range of companies and the time period studied. This study employs an alternative method that finds “naturally occurring” groups of companies based on the quantifiable relationship between the company returns themselves. The resulting groups are then examined in terms of their country and sector composition. The groups indicate that companies clearly cluster by country rather than by sector and that this effect has become more pronounced over time. This has important implications for financial analysts and portfolio managers.
Keywords
Citation
Sell, C.W. (2005), "The importance of country versus sector characteristics", Managerial Finance, Vol. 31 No. 1, pp. 78-95. https://doi.org/10.1108/03074350510769460
Publisher
:Emerald Group Publishing Limited
Copyright © 2005, Emerald Group Publishing Limited