Existing literature has produced broadly inconclusive evidence about the asset pricing model which best fits partially integrated markets. This paper examines whether industry and country factors are independent factors helping to determine returns in emerging stock markets, or are derived from the stocks’ risk-return characteristics. We link the country-industry decomposition framework to the local and the Global CAPM in a new and more direct way. The results show that country factors are additional independent sources of cross-sectional variation in stock returns before 1996 particularly under the Global CAPM. After 1996, the results suggest partial integration: industry and country factors are both additional independent determinants of cross-sectional variations in stock returns. . •Country factors are independent sources of stock return variations before 1996.•Post 1996 industry-country factors are jointly sources of stock return variations.•Global CAPM cannot capture the strong country effects due to market segmentation.•Post Asian crisis, integration among emerging markets is better captured by GCAPM.•Beta decompositions are in line with return and conditional risk decompositions.