A selection of countries that are grouped together in order to provide insight into the effect of changing economic conditions. A country basket may track the economies and markets of countries that have similar economic characteristics, such as being part of the G8, that have particular trade characteristics, such as being export-lead, or that rely on the production of certain goods, such as oil.
A country basket can also refer to a basket of securities that track the performance of the overall economy of a given nation. The selected securities would include companies of ranging market caps and sectors.
Country baskets are used by investors in the creation of derivatives, such as those that track emerging markets. Rather than buy individual securities that track the indexes of each country, investors can purchase a security that tracks the performance of a country basket of indexes. The index may be weighted according to the size of each country's economy. Economists use country baskets to determine how changes to the world economy, such as a recession, may affect developing nations.
Investment dictionary. Academic. 2012.