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Firms' Exposures to Geographic Risks

Author

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  • Dumas, Bernard
  • Gabuniya, Tymur
  • Marston, Richard C
Abstract
The distinction between domicile and place of business is becoming more and more relevant as a growing number of firms have activities abroad. In most statistical studies of international stock returns, a firm is included in a country's index if its headquarters are located in that country. This classification scheme ignores the operations of the firm. We propose, instead, to measure the firm's exposures to "geographic zones" according to the place where they conduct business. As a representation of "geographic risks", we synthesize zone factors from all firms in the dataset, be they domestic firms or multinationals. And we show the properties of the exposures to the zone factors.

Suggested Citation

  • Dumas, Bernard & Gabuniya, Tymur & Marston, Richard C, 2020. "Firms' Exposures to Geographic Risks," CEPR Discussion Papers 15503, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15503
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock return indexes; Stock return exposures; Geographic investing; Factor models; Country factors; Expectations-maximization algorithm;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • F3 - International Economics - - International Finance
    • F6 - International Economics - - Economic Impacts of Globalization
    • G1 - Financial Economics - - General Financial Markets

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