International transmission of risk factor movements: The case of developed markets

Hyung Suk Choi, Doojin Ryu, Heejin Yang

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Under the Carhart four-factor system, this study examines the international transmission mechanism among country-specific risk factors by focusing on the cross-border transmission of factor innovation. We find that international stock markets are interrelated with respect to market, size, value and momentum factors, and developed countries play different roles in each factor system. Moreover, the United States (US) plays a dominant role in the market factor system, with US innovations in terms of size and momentum factors being significantly transmitted to other markets, whereas its influence on the value factor seems marginal. The United Kingdom is found to be the most influential market in the size factor system. Finally, Japanese value factor innovations better explain Hong Kong variance than US value factor innovations. Our results indicate that international exposure to risk factors can be exploited to implement effective hedging strategies and manage globally diversified portfolio risks.

Original languageEnglish
Pages (from-to)111-126
Number of pages16
JournalInvestment Analysts Journal
Issue number2
StatePublished - 2018

Bibliographical note

Publisher Copyright:
© 2018 Investment Analysts Society of South Africa.


  • Forecast error variance
  • Impulse response function
  • International transmission
  • Multi-factor model
  • Vector autoregression


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