Factors affecting returns across stock markets

Complementing recent research on the factors explaining differences in mean returns across stocks within the U.S. (Fama & French, 1992) and Japanese (Chan, Hamio, & Lakonishok, 1991) markets, this article reports the results of an investigation of factors hypothesized to explain differences in mean returns across entire national stock markets. Unlike most studies focused solely on U.S. stocks, this study does not find a beta or size effect in the assessment of national stock market movements. The most relevant factor for explaining disparate returns across markets is country risk.