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Should U.S. investors hold foreign stocks?

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Abstract

U.S. investors have traditionally been reluctant to acquire foreign securities_in part, perhaps, because they fear that restrictions on trading in foreign markets will sharply limit any gains they might realize from diversifying their portfolios. An analysis of the effects of one type of restriction, short-sale constraints, on stock returns between 1976 and 1999 suggests that investing in emerging market stocks offers substantial benefits even when a ban on short sales is in place.

Suggested Citation

  • Kai Li & Asani Sarkar, 2002. "Should U.S. investors hold foreign stocks?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(Mar).
    • Handle: RePEc:fip:fednci:y:2002:i:mar:n:v.8no.3
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    Cited by:

    1. Stephanos Papadamou & Costas Siriopoulos, 2004. "American equity mutual funds in European markets: Hot hands phenomenon and style analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 85-97.

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