Security returns

Question

Security returns are found to be less correlated across various countries rather than within the country. Explain Why?

Answer 1

Security returns are less correlated since countries are different from each other related with the macroeconomic policies, industry structure, resource endowments, and have non-synchronous business cycles. Securities from same country are subjected to the same business cycle and macroeconomic policies, hence resulting in the high correlations among their returns.