Discussion paper

DP15503 Firms' Exposures to Geographic Risks

The distinction between domicile and place of business is becoming more and more relevant as a growing number of firms have activities abroad. In most statistical studies of international stock returns, a firm is included in a country's index if its headquarters are located in that country. This classification scheme ignores the operations of the firm. We propose, instead, to measure the firm's exposures to "geographic zones" according to the place where they conduct business. As a representation of "geographic risks", we synthesize zone factors from all firms in the dataset, be they domestic firms or multinationals. And we show the properties of the exposures to the zone factors.


Dumas, B, T Gabuniya and R Marston (2020), ‘DP15503 Firms' Exposures to Geographic Risks‘, CEPR Discussion Paper No. 15503. CEPR Press, Paris & London. https://cepr.org/publications/dp15503