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Gains from Portfolio Diversification into Less Developed Countries’ Securities

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  • Vihang R Errunza

    (McGill University)

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    Abstract

    This paper substantiates the intuitive argument for international portfolio diversification—diversification that is not limited to the developed markets, but also includes the corporate securities of less developed countries (LDCs). Such diversification, in light of all available evidence, appears to be desirable from the standpoint of the investor.Capital flows resulting from international diversification can tremendously improve liquidity position of the developing countries and provide a major development impact by increasing the probability of success of the capital market development programs being pursued by many LDCs, e.g., Brazil, Venezuela, Colombia, Indonesia, Nigeria, and Korea.© 1977 JIBS. Journal of International Business Studies (1977) 8, 83–100

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 8 (1977)
    Issue (Month): 2 (June)
    Pages: 83-100

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    Handle: RePEc:pal:jintbs:v:8:y:1977:i:2:p:83-100

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    Cited by:
    1. Peter Christoffersen & Vihang Errunza & Kris Jacobs & Hugues Langlois, 2012. "Is the Potential for International Diversification Disappearing? A Dynamic Copula Approach," Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3711-3751.
    2. Buchanan, Bonnie G. & English II, Philip C. & Gordon, Rachel, 2011. "Emerging market benefits, investability and the rule of law," Emerging Markets Review, Elsevier, vol. 12(1), pages 47-60, March.
    3. Mohamed El Hedi Arouri & Mondher Bellalah & Duc Khuong Nguyen, 2008. "The Comovements In International Stock Markets: New Evidence From Latin American Emerging Countries," Working Papers halshs-00202943, HAL.
    4. Lee, Suk Hun & Sung, Hyun Mo & Urrutia, Jorge L., 1996. "The behavior of secondary market prices of LDC syndicated loans," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 537-554, April.
    5. Coen, Alain, 2001. "Home bias and international capital asset pricing model with human capital," Journal of Multinational Financial Management, Elsevier, vol. 11(4-5), pages 497-513, December.
    6. Bekaert, Geert & Harvey, Campbell R., 2003. "Emerging markets finance," Journal of Empirical Finance, Elsevier, vol. 10(1-2), pages 3-56, February.
    7. Aloui, Riadh & Aïssa, Mohamed Safouane Ben & Nguyen, Duc Khuong, 2011. "Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure?," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 130-141, January.
    8. Bilson, Christopher M. & Brailsford, Timothy J. & Hooper, Vincent C., 2002. "The explanatory power of political risk in emerging markets," International Review of Financial Analysis, Elsevier, vol. 11(1), pages 1-27.
    9. Bilson, Christopher M. & Brailsford, Timothy J. & Hooper, Vincent J., 2001. "Selecting macroeconomic variables as explanatory factors of emerging stock market returns," Pacific-Basin Finance Journal, Elsevier, vol. 9(4), pages 401-426, August.
    10. Phengpis, Chanwit & Swanson, Peggy E., 2004. "Increasing input information and realistically measuring potential diversification gains from international portfolio investments," Global Finance Journal, Elsevier, vol. 15(2), pages 197-217, August.
    11. Jory, Surendranath R. & Ngo, Thanh N., 2012. "The effect of foreign segment location on the geographical diversification discount," Global Finance Journal, Elsevier, vol. 23(2), pages 108-124.
    12. Thapa, Chandra & Poshakwale, Sunil S., 2012. "Country-specific equity market characteristics and foreign equity portfolio allocation," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 189-211.

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