Country, Sector, and Company Factors in

This book enables managers of equity portfolios to surpass simple country returns in a time when differences in country returns are shrinking while differences in global sectors returns grow. As efficient portfolio diversification depends critically on how the investment universe is divided, Hopkins and Miller analyze four dimensions of global equity portfolios: countries, sectors, industries and companies. Combining clear and thorough descriptions of a variety of statistical methods with an abundance of statistical results, their analysis explores the underlying causes of changes in global and country sectors. Indispensible to anyone charged with the responsibility of forecasting returns, estimating risk, or structuring efficient portfolios in the global arena, this book will prove an invaluable reference.

Peter J.B. Hopkins is a director of the Investment Management Group and head of the Quantitative Research Team (QRT) at Baring Asset Management. He is responsible for the quantitative stage of BAM's investment processes, including stock selection and market allocation modeling. He holds an M.A. and D.Phil. in theoretical nuclear physics from Oxford University, where he was also a lecturer in physics and a research assistant in robotics.

C. Hayes Miller, CFA is head of Baring Asset Management's Investment Management Team for North American clients and a member of BAM's Strategic Policy Group, which sets policy for global mandates. He is an asset allocation specialist and developed the country and sector screening models used by BAM.

Foreword

viii

Preface

x

Geography versus Sectors and Industries

1

(40)

The Opportunity from Company and Stock Selection

41

(8)

Countries, Sectors, and Stocks in Active Portfolio Management

49

(14)

Conclusions

63

(2)

Appendix A. MSCI Global Industry Classification Standard

65

(2)

Appendix B. Regression Technique

67

(2)

Appendix C. Explanatory Power Statistic

69

(2)

Appendix D. Average Characteristics of Countries and Sectors Used in Weighting

71

(2)

References

73

(2)

Selected AIMR Publications

75

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Country, Sector, and Company Factors in Global Equity Portfolios

Summary

Author Biography

Table of Contents

Supplemental Materials