Our speaker will be Andreas Neuhierl (Washington University St.Louis).

He will give a talk on “International Investing: Diversification and Beyond” (joint with Soohun Kim and Robert Korajczyk).

Abstract: We propose a novel two-country factor-pricing framework that leverages firm characteristics to extract both common and country-specific risk exposures and detect cross-border disparities in compensation.  Implemented via Projected-PCA and Canonical Correlation Analysis, our method is validated on simulated factor economies and a large panel of international stock returns spanning 27 developed and developing markets.  We document substantial temporal deviations in pricing for shared risks and widespread mispricing opportunities—even among G7 countries.  Finally, we show that targeted portfolio strategies—tilted toward identified country-specific factors or designed to hedge and capture common-factor premium gaps—deliver robust, statistically significant profits and markedly improve diversification.  Our results challenge the notion of fully integrated global equity markets and offer actionable portfolio strategies for international investors.

The talk will take place on July 16, 2025 at 12:00 pm in room D3.0.225.