The globalization of the world's economy continues unabated. The media is filled with examples on a daily basis. It therefore should come as little surprise that the role country effects on investment returns is also diminishing.

CXO Advisory Group recaps a paper that documents the growing influence of global industry effects at the expense of country effects. The effects they saw were more pronounced in the developed markets and in certain industries. In the emerging markets country effects still dominate, although industry effects are becoming more important. These results are probably not shocking to most of our readers, but interesting nonetheless.

Jay Walker at the Confused Capitalist is a self-admitted "big fan" of the emerging markets due in large part to their lower valuations. He points to a report that provides some support to his case. One question that remains unresolved is the degree to which emerging markets volatility and the seemingly high correlations with the developed markets remains.

James Picerno at the Capital Spectator points to an IMF report that highlights the improving economic and capital situation in many emerging markets. Picerno wonders whether this should lead to lower volatility and a higher correlation with the developed markets? He quotes an analyst who believes the main attraction of the emerging markets is their higher growth rate.

The case for the emerging markets has been made on two major grounds. The first is that they are less correlated with the rest of the world and are therefore a good portfolio diversifier. However as that growth matures it can transform a country's economy. As an emerging market develops it should become less volatile and more integrated with the world's markets.

The second case that has been made is that the more rapid economic growth in the emerging markets makes them more attractive. There are two main points here. First, as with all growth stories one should be conscious of the price paid for that growth. The Internet bubble should have taught us that. Second it is not always a one-for-one relationship between economic growth and earnings growth.

We would argue that the diversification case for the emerging markets is still the most attractive argument. A globally diversified portfolio should maintain some exposure to the emerging markets. As to the growth argument we will leave that up to those with a better handle on the facts on the ground.

With the rapid increase in the number and type of exchange traded funds, it has become more difficult to wade through the competing claims of all the funds. For those seeking simplicity, and some sanity, Marc Hogan at highlights five ETFs that in a portfolio allow an investor to achieve a good measure of global diversification. Not surprisingly it does include some emerging markets exposure.

For those seeking out some complexity, Lawrence Carrel at looks at the slew of forthcoming currency ETFs that are coming to market. They are based on the model that spawned the Euro Currency Trust (FXE)

Ticker Sense has another of their cool graphs. This time they document the role that earnings and P/E ratios have had on a country's equity returns since the beginning of this most recent bull market. For the most part the gains have come via earnings growth with P/E ratios falling in the vast majority of markets.

Apparently even the retail automobile market is becoming more global. Alright maybe not global, but according to an article by Greg Keenan in the Global & Mail it pays for Canadian auto shoppers to look to the U.S. market. There prices for many vehicles, even after certain expenses, are significantly cheaper than in Canada. Hello, Buffalo!

The bottom line is that railing against globalization is by now a tired argument. It is here and it is incumbent on investors to educate themselves on the opportunities it affords for creating more efficient and dynamic portfolios.

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