The results above have several important implications for the international finance and diversification literature. First, while our analysis of interna- tional stock return comovements reveals significant weaknesses of theHeston– Rouwenhorst model, when viewed as a factor model, we also show that the Heston–Rouwenhorst empirical results regarding the primacy of country fac- tors stand the test of time. Second, all of our results confirm that there still ap- pear to be benefits from international diversification: For many country groups we do not find that significant trends in correlations and country factors still dominate industry factors. Yet, we do see the effects of globalization as well. The correlation trends would suggest.
