Using a novel sample of foreign securities available for trade in 42 countries during the last four decades (1979-2018), we characterize the rise in importance of foreign stocks for investors in their host countries and its implications for diversification benefits across industries and countries. We document a substantial increase in the number and the market value of stocks available for trade in markets outside of their home country (i.e., foreign stocks). The availability of foreign stocks in host countries allows domestic investors to increase their international diversification from home by investing in these stocks. We find that this rise in the number of foreign securities has led to the increase in the importance of industry effects relative to country effects on stock returns. Thus, we conclude that including foreign stocks in portfolio investments offers an effective substitute for international diversification, and significantly contributes towards increasing the integration of global markets.

中文翻译：

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外国股票能替代国际多元化吗？1

我们使用过去四年（1979 年至 2018 年）在 42 个国家/地区可交易的外国证券的新样本，描述了外国股票对东道国投资者重要性的上升及其对跨行业和跨国家/地区的多元化收益的影响。我们记录了可在本国以外市场交易的股票（即外国股票）的数量和市场价值的大幅增加。外国股票在东道国的可用性允许国内投资者通过投资这些股票来增加他们在国内的国际多元化。我们发现，外国证券数量的增加导致行业效应相对于国家效应对股票回报的重要性增加。因此，