Global Equity Styles and Industry Effects: Portfolio Construction via Dummy Variables

This paper extends the model of Heston and Rouwenhorst (1994) to investigate the effects of size, value, industry, and country factors on the volatility of stock returns in international stock markets. Country factors dominate the other factors in explaining the return variation. The second most important factors are industry factors followed by value and size factors. Furthermore, after removing possible influences from country and industry factors, the authors find that a global value effect still exists, whereas a global size effect does not.