Global Pricing of Equity

Posted: 25 Sep 2001

See all articles by Jeff Diermeier

Jeff Diermeier

UBS Global Asset Management

Bruno Solnik

Hong Kong University of Science & Technology (HKUST) - Department of Finance ; HEC Paris - Departement Finance et Economie

Abstract

Global equity management has historically been structured around country asset allocation. This approach was supported by the observations that the country factor is the major source of influence on stock-price behavior and that the correlation between equity and currency is close to zero and unstable. If a corporation is regarded as a portfolio of international activities, however, its stock price should be influenced by international factors in relation to the geographical breakdown of its activities rather than where its headquarters is located or its stock is traded. We examined a large cross-section of security prices and found that regional factors and currency factors have a strong influence on asset returns beyond that of domestic factors. Moreover, the sensitivity of individual company returns to nondomestic factors is closely related to the extent of their international activities, as proxied by the relative importance of foreign sales to total sales. We review the implications of these findings for the asset management profession.

Suggested Citation

Diermeier, Jeff and Solnik, Bruno, Global Pricing of Equity. Available at SSRN: https://ssrn.com/abstract=279493

Jeff Diermeier

UBS Global Asset Management

1 North Wacker Drive
Chicago, IL 60606
United States

Bruno Solnik (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

HEC Paris - Departement Finance et Economie ( email )

1, rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
+33 1 39 67 72 84 (Phone)
+33 1 39 67 70 85 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,532
PlumX Metrics