Emerging stock markets have been identified as being at least partially segmented from global capital markets. As a consequence, it has been argued that local risk factors rather than world risk factors are the primary source of equity return variation in these markets. Accordingly, Bilson, Brailsford, and Hooper (1999) aimed to address the question of whether macroeconomic variables may proxy for local risk sources. They found moderate evidence to support this hypothesis. Further, they investigated the degree of commonality in exposures across emerging stock market returns using a principal components approach, and found little evidence of commonality when emerging.
