Global asset pricing models have failed to capture the cross section of country equity returns. Emerging markets display robust positive pricing errors and country-level characteristics play a role in pricing international equities. This paper offers a risk-based explanation for such asset...

Global asset-pricing models have failed to capture the cross section of country equity returns. Emerging markets have displayed strikingly large and robust positive pricing errors. Country-level characteristics have played a significant role in pricing international equities, suggesting that...