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International Diversification Of Equities And Fixed-Income Securities

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  • Joanne Hill
  • Thomas Schneeweis

Abstract

Portfolio selection models have been applied principally to common stocks traded in the United States and in foreign stock markets. This study examines the efficient set of portfolios selected from a choice set that includes returns derived from domestic and international corporate bond and government bond indices as well as domestic and international stock indices. To assess the benefits of international multi-asset diversification, the authors examine the following issues: (1) the extent to which international and domestic fixed-income securities are included in efficient portfolios; (2) the effect on efficient set composition of using the Sharpe portfolio selection model as compared to the Markowitz portfolio selection model; (3) the sensitivity of efficient set characteristics produced from a single-index based portfolio selection model to alternative world market indices; and (4) the correspondence between expected and realized portfolio risk and return for the different portfolio selection models.

Suggested Citation

  • Joanne Hill & Thomas Schneeweis, 1983. "International Diversification Of Equities And Fixed-Income Securities," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 6(4), pages 333-343, December.
    • Handle: RePEc:bla:jfnres:v:6:y:1983:i:4:p:333-343
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    File URL: http://hdl.handle.net/10.1111/j.1475-6803.1983.tb00343.x
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    References listed on IDEAS

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    1. Levy, Haim & Sarnat, Marshall, 1978. "Exchange Rate Risk and the Optimal Diversification of Foreign Currency Holdings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 453-463, November.
    2. William F. Sharpe, 1963. "A Simplified Model for Portfolio Analysis," Management Science, INFORMS, vol. 9(2), pages 277-293, January.
    3. Schneeweis, Thomas & Woolridge, J. Randall, 1979. "Capital Market Seasonality: The Case of Bond Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(5), pages 939-958, December.
    4. Frankfurter, George M. & Phillips, Herbert E. & Seagle, John P., 1976. "Performance of the Sharpe Portfolio Selection Model: A Comparison," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 11(2), pages 195-204, June.
    5. Ibbotson, Roger G & Sinquefield, Rex A, 1976. "Stocks, Bonds, Bills, and Inflation: Year-by-Year Historical Returns (1926-1974)," The Journal of Business, University of Chicago Press, vol. 49(1), pages 11-47, January.
    6. Agmon, Tamir, 1972. "The Relations Among Equity Markets: A Study of Share Price Co-Movements in the United States, United Kingdom, Germany and Japan," Journal of Finance, American Finance Association, vol. 27(4), pages 839-855, September.
    7. Solnik, Bruno H, 1977. "Testing International Asset Pricing: Some Pessimistic Views," Journal of Finance, American Finance Association, vol. 32(2), pages 503-512, May.
    8. Alexander, Gordon J., 1977. "Mixed Security Testing of Alternative Portfolio Selection Models," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(5), pages 817-832, December.
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    Cited by:

    1. Tom Barnes, 1985. "Markowitz Allocation–Fixed Income Securities," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(3), pages 181-191, September.
    2. Sifat, Imtiaz & Zarei, Alireza & Hosseini, Seyedmehdi & Bouri, Elie, 2022. "Interbank liquidity risk transmission to large emerging markets in crisis periods," International Review of Financial Analysis, Elsevier, vol. 82(C).

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