This examination of developed and emerging markets suggests that toward the end
of the 20th century, sector effects caught up with country effects in the
developed markets of the world, as a result of rising sector effects rather than
declining country effects. For emerging markets, however, country effects have
remained the dominant influence relative to sector effects, although the
importance of country effects has been on a steady decline. These results
confirm that international equity managers should emphasize sector-based
approaches when investing in the developed countries but should continue
country-based allocation strategies in emerging markets.