Country and Sector Effects in Asia Pacific Markets

This paper focuses on the impact of country and sector effects in Asia Pacific equity market returns. Our study concludes that Asia Pacific market returns are mainly driven by country effects. Accordingly, country diversification is the most useful tool for managing portfolio risk. Recent evidence from developed markets indicates that country effect is no longer dominant and that sector exposure is of increasing significance in managing portfolio risk. We observed the same phenomenon; the difference is that it happened after the crisis period, not during the period as observed in the previous study.