What’s My International Exposure?

Comparing top-down vs bottom-up approaches

February 2023. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • The S&P 500 has meaningful exposure to international markets
  • Measuring geographical exposure can be done top-down or bottom-up
  • However, both approaches have flaws


Globalization has significantly improved our lives, although some countries like Germany have benefitted more than others given export-oriented industries. It is easy for politicians to highlight damage done by foreign nations, and make the case for more protective and nationalistic policies.   

However, most countries depend on global trade, and even large economies like China or the US can not turn away from it without severe economic consequences. Moving jobs that were outsourced to China or Vietnam back to the US or Europe will perhaps improve supply chain logistics, as well as achieve certain political goals, but it unlikely will make production cheaper. 

Investors typically consider the S&P 500 as a portfolio of 500 American companies. Although most of the constituents are headquartered in the US, many have significant sales abroad. Coca-Cola generates more than 60% of its sales outside of the US, so is it an American or global company?

Buying the S&P 500 will provide investors with exposure to the global economy, so adding international or emerging market funds or ETFs might not provide any additional diversification benefits. Key is to measure the exposure to geographies, which we explore in this article.


Investors can analyze the breakdown by geographies top-down or bottom-up. The former implies regressing a portfolio against variables representing the different geographies. The latter means analyzing fundamental data like the location of headquarters or breakdown by revenues of the underlying companies. Unfortunately, many companies do not provide any information on where their sales originate, which makes this approach often difficult to implement.

We will first evaluate the top-down methodology, but will contrast the results with fundamental data later on. The basic approach is to run a regression analysis on a single stock or portfolio using equity indices for the major regions. We take the S&P 500 for the US, S&P Europe 350 for Europe, M