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Have Expected Benefits From World Market Diversification Decreased In Recent Years? Evidence From A Conditional Icapm With Asymmetric Effects

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  • Arouri Mohamed El Hedi

Abstract

This paper tests a conditional International Capital Asset Pricing Model (ICAPM) using an asymmetric multivariate GARCH specification, and explores the dynamics of expected benefits from international portfolio diversification. The evidence supports the conditional ICAPM and financial integration hypothesis and shows that investors from all countries could expect statistically significant gains from the world portfolio diversification. However, these gains are considerably larger for investors with smaller home markets. Interestingly, there is only a slight tendency for expected gains from world diversification to decrease over time, in response to changing market conditions.

Suggested Citation

  • Arouri Mohamed El Hedi, 2006. "Have Expected Benefits From World Market Diversification Decreased In Recent Years? Evidence From A Conditional Icapm With Asymmetric Effects," The IUP Journal of Applied Economics, IUP Publications, vol. 0(2), pages 7-15, March.
    • Handle: RePEc:icf:icfjae:v:05:y:2006:i:2:p:7-15
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    Cited by:

    1. Khaled Khaled & Amel Belanes & Sandrine Kablan, 2018. "The regional pricing of risk: An empirical investigation of the MENA Region," Economics Bulletin, AccessEcon, vol. 38(2), pages 751-760.
    2. Guesmi, Khaled & Kablan, Sandrine & Belgacem, Aymen, 2015. "The regional pricing of risk: An empirical investigation of the MENA equity determinants," MPRA Paper 70271, University Library of Munich, Germany, revised 2015.
    3. Khaled Guesmi & Olfa Kaabia & Ilyes Abid, 2017. "ASEAN Plus Three Stock Markets Integration," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(3), pages 565-581, September.

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