The findings presented in Table 1 may appear discouraging.
As explained in the next section, a global factor has a simple interpretation: the average excess return across regions.
This explains the high cross-region correlations in Table 2.
Our study focuses exclusively on the developed world, specifically, eight macro regions: United States, Japan, Germany, United Kingdom, France, Canada, Europe excluding the aforementioned three major economies, and Asia Pacific excluding Japan.
Within each macro region, we construct long–short factor portfolios.