∗Early work on this topic benefitted from discussions with Rajith Lakshman. We are grateful to

The International Capital Asset Pricing Model measures country risk in terms of the conditional covariance of national returns with the world return. Using impulse responses from a multivariate non-linear model we provide evidence of time variation and asymmetry in the measure of country risk. and the implied benefit to international diversification. The evidence implies that the price of risk and the benefits from diversification may differ in a statistically and economically meaningful fashion across bull and bear markets