CentER

Esther Eiling

Abstract:
The first part of this dissertation contains three studies on international finance. There is wide agreement among finance practitioners and academics that the gains from international diversification can be substantial. However, in order to take full advantage of these diversification opportunities, a clear understanding is required of the comovements between international equity markets and the factors that drive these returns. This study examines how cross-country correlations and market integration evolve over time for both developed and emerging markets. Next, we compare the relative importance of country, industry and currency risk factors for developed markets' equity returns. Last, we examine whether the optimal international diversification strategy in the Euro-zone has changed after the introduction of the Euro.

The second part of this dissertation takes a more general asset pricing perspective. In particular, it investigates the impact of human capital on asset pricing. Investors' portfolio decisions may be affected by their human capital. For instance, an investor who works in the IT sector may want to invest less in IT stocks in order to hedge against her human capital risk. Consequently, investors' human capital may affect the risk premium for stocks. This study examines the impact of industry-specific human capital on the cross-section of expected stock returns.