Table 13: Political Risk, Economic Risk and Financial Risk

Cross-Sectional Prediction of Country Returns Semi-Annual Data, 1984-1995
A. Semi-Annual Return vs. Risk Attribute
Average Ave Slope Standard T-Stat Average % Negative
Intercept Coefficient Error R-Square Coefficient
II CCR 0.2413 -0.0018 0.0008 -2.36 8.2% 65.2%
ICRGC 0.3110 -0.0025 0.0014 -1.76 7.6% 65.2%
ICRGP 0.2671 -0.0019 0.0012 -1.67 6.1% 69.6%
ICRGF 0.2785 -0.0038 0.0025 -1.50 8.9% 56.5%
ICRGE 0.3747 -0.0069 0.0034 -2.02 8.3% 56.5%
BP 0.0344 0.1387 0.0311 4.46 9.4% 17.4%
B. Semi-Annual Return vs. Risk Attribute & Book-to-Price
Risk Attribute Book-to-Price
Average Ave Slope Standard T-Stat % Negative Ave Slope Standard T-Stat % Negative Average
Intercept Coefficient Error Coefficient Coefficient Error Coefficient R-Square
CCR 0.0869 -0.0008 0.0007 -1.12 65.2% 0.1227 0.0315 3.89 17.4% 16.1%
ICRGC 0.1708 -0.0017 0.0014 -1.22 65.2% 0.1277 0.0291 4.39 17.4% 16.3%
ICRGP 0.2132 -0.0023 0.0013 -1.70 69.6% 0.1294 0.0322 4.02 21.7% 16.1%
ICRGF 0.0908 -0.0014 0.0022 -0.61 52.2% 0.1304 0.0285 4.57 17.4% 16.6%
ICRGE 0.0420 -0.0003 0.0030 -0.10 43.5% 0.1347 0.0284 4.75 17.4% 15.9%
C. Semi-Annual Return vs. Adjusted Risk Attribute
Average Ave Slope Standard T-Stat Average % Negative
Intercept Coefficient Error R-Square Coefficient
CCR 0.0965 0.0401 0.0317 1.26 17.9% 39.1%
ICRGC 0.1055 0.0272 0.0354 0.77 17.3% 43.5%
ICRGP 0.0960 0.0446 0.0326 1.37 16.0% 43.5%
ICRGF 0.1030 0.0259 0.0333 0.78 17.9% 43.5%
ICRGE 0.1115 0.0196 0.0330 0.59 18.9% 47.8%
BP 0.0654 0.0683 0.0334 2.05 24.0% 30.4%
D. Semi-Annual Return vs. Risk Attribute & Adjusted Risk Attribute
Risk Attribute Adjusted Risk Attribute
Average Ave Slope Standard T-Stat % Negative Ave Slope Standard T-Stat % Negative Average
Intercept Coefficient Error Coefficient Coefficient Error Coefficient R-Square
CCR 0.2280 -0.0023 0.0007 -3.24 73.9% 0.0494 0.0316 1.56 30.4% 26.0%
ICRGC 0.3175 -0.0031 0.0014 -2.18 60.9% 0.0409 0.0362 1.13 39.1% 24.6%
ICRGP 0.2832 -0.0028 0.0012 -2.35 78.3% 0.0537 0.0335 1.60 34.8% 22.6%
ICRGF 0.2715 -0.0047 0.0024 -1.96 60.9% 0.0393 0.0341 1.15 39.1% 26.3%
ICRGE 0.3618 -0.0073 0.0035 -2.12 56.5% 0.0292 0.0330 0.88 52.2% 26.3%
BP -0.0037 0.0972 0.0324 3.00 31.8% 0.0701 0.0349 2.01 36.4% 31.7%
-Adjusted attributes are according to Ferson-Harvey methodology.

Last Update: 5/28/96

Name: Campbell R. Harvey

Email: charvey@mail.duke.edu