Measuring the impact of political risk on investment projects is one of the most vexing issues in international business. One popular approach is to assume that the sovereign yield spread captures political risk and to augment the project discount rate by this spread. We show that this approach...

We provide a comprehensive analysis of the impact of economic and financial globalization on asset return comovements over the past 35 years. Our globalization indicators draw a distinction between de jure openness that results from changes in the regulatory environment and de facto or realized...

We introduce a new, market-based and forward looking measure of political risk derived from the yield spread between a country's U.S. dollar debt and an equivalent U.S. Treasury bond. We explain the variation in these sovereign spreads with four factors: global economic conditions,...

We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by the...

We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by the...

We examine international stock return comovements using country-industry and country-style portfolios as the base portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We...