What explains the benefits of international portfolio diversification?

Najah Attig; Omrane Guedhami; Gregory Nazaire; Oumar Sy

doi:10.1016/j.intfin.2022.101729

What explains the benefits of international portfolio diversification?

Najah Attig, Omrane Guedhami, Gregory Nazaire, Oumar Sy

Rowe School of Business

Research output: Contribution to journal › Article › peer-review

13 Citations (Scopus)

Abstract

This study uses a large sample of international stocks to examine the sources of the benefits of international portfolio diversification. It finds not only that international diversification outperformed industrial diversification over the past 27 years, but also that the gains from international diversification derive primarily from mitigating market, political, and inflation risks. Economic risk appears important for investors giving more weight to smaller countries, while financial risk appears more important to funds limited to large countries. Risks related to the quality of the legal and credit environments seem less important for international diversification.

Original language	English
Article number	101729
Journal	Journal of International Financial Markets, Institutions and Money
Volume	83
DOIs	https://doi.org/10.1016/j.intfin.2022.101729
Publication status	Published - Mar 2023

Bibliographical note

Funding Information:
None.

Publisher Copyright:
© 2023 Elsevier B.V.

ASJC Scopus Subject Areas

Finance
Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1016/j.intfin.2022.101729

Cite this

@article{f2eada801d57419f928b690995527f92,

title = "What explains the benefits of international portfolio diversification?",

abstract = "This study uses a large sample of international stocks to examine the sources of the benefits of international portfolio diversification. It finds not only that international diversification outperformed industrial diversification over the past 27 years, but also that the gains from international diversification derive primarily from mitigating market, political, and inflation risks. Economic risk appears important for investors giving more weight to smaller countries, while financial risk appears more important to funds limited to large countries. Risks related to the quality of the legal and credit environments seem less important for international diversification.",

author = "Najah Attig and Omrane Guedhami and Gregory Nazaire and Oumar Sy",

note = "Funding Information: None. Publisher Copyright: {\textcopyright} 2023 Elsevier B.V.",

year = "2023",

month = mar,

doi = "10.1016/j.intfin.2022.101729",

language = "English",

volume = "83",

journal = "Journal of International Financial Markets, Institutions and Money",