Define where security returns are found less correlated, Financial Management

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Security returns are found to be less correlated across countries than within a country. Why can this be?

Answer:  Security returns are less correlated possibly because countries are dissimilar from each other in terms of resource endowments, industry structure, macroeconomic policies, and have non-synchronous business cycles. Securities from a similar country are subject to the same business cycle and macroeconomic policies, so causing high correlations between their returns.


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