Our first new result is that risk-based models fit the stock return comove- ments between our portfoliosmuch better than theHeston–Rouwenhorstmodel does. In particular, the APT and a Fama–French (1998) type model with global and regional factors fit the data particularly well. Second, in examining time trends in country return correlations, we find a significant upward trend for stock return correlations only within Europe. Third, we revisit the country- industry debate by examining the relative evolution of correlations across coun- try portfolio returns versus correlations across industry portfolio industry correlations seem to have decreased in relative terms over the 1990s, this evolution has been halted and reversed, and there.
