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Who benefits more from international diversification?

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  • Chiou, Wan-Jiun Paul
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    Abstract

    This paper investigates the relative magnitude of the international diversification benefits for the domestic investors in various countries. The constraints of short-sales, over-weighting investments, and investing region are considered. The empirical results suggest that local investors in the less developed countries, particularly in East Asia and Latin America, comparatively benefit more from both regional and global diversification. This finding holds even though the international market has become more integrated so that the diversification benefits have decreased over the past two decades. The results are useful for asset management professionals to determine target markets to promote the business of national/international funds.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 18 (2008)
    Issue (Month): 5 (December)
    Pages: 466-482

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    Handle: RePEc:eee:intfin:v:18:y:2008:i:5:p:466-482

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    Web page: http://www.elsevier.com/locate/intfin

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    Cited by:
    1. Esqueda, Omar A. & Assefa, Tibebe A. & Mollick, André Varella, 2012. "Financial globalization and stock market risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 87-102.
    2. Axel Grossmann & Emiliano Giudici & Marc Simpson, 2014. "Euro conversion and return dynamics of European financial markets: a frequency domain approach," Journal of Economics and Finance, Springer, vol. 38(1), pages 1-26, January.
    3. Anil Mishra, 2011. "Australia’s equity home bias and real exchange rate volatility," Review of Quantitative Finance and Accounting, Springer, vol. 37(2), pages 223-244, August.
    4. Demirer, Riza, 2013. "Can advanced markets help diversify risks in frontier stock markets? Evidence from Gulf Arab stock markets," Research in International Business and Finance, Elsevier, vol. 29(C), pages 77-98.
    5. Paul Chiou & Cheng-Few Lee, 2013. "Do investors still benefit from culturally home-biased diversification? An empirical study of China, Hong Kong, and Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 341-381, February.
    6. Mansourfar, Gholamreza & Mohamad, Shamsher & Hassan, Taufiq, 2010. "The behavior of MENA oil and non-oil producing countries in international portfolio optimization," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 415-423, November.

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