Euro-zone equity returns: country versus industry effects

2012

This paper investigates whether Euro-zone equity returns are driven by country or industry

effects over the 1990 to 2008 period. Using a style analysis approach, we find that before the

introduction of the Euro country effects dominate, while industry effects prevail after 1999. This

reversal at the aggregate level is driven mainly by countries that were least integrated in the

EMU and world markets prior to the Euro launch. For markets with stronger economic linkages,

such as Germany and France, industry effects dominate both in the nine years before and in the

nine years after the introduction of the Euro.

This is the authors’ accepted and refereed manuscript to the article also published at www.ssrn.com

Oxford University Press

Review of Finance