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Twenty Years of International Diversification from a German Perspective

Author

Listed:
  • Wolfgang Gerke
  • Ferdinand Mager
  • Alexander Röhrs

Abstract

We examine the potential benefits of international portfolio diversification over the last two decades from an ex-post and ex-ante German investor’s perspective. We explicitly consider the effect of a German home bias. Our analysis shows that international diversification is highly desirable, but practical implementation of unrestricted historically based portfolio weightings is limited due to selectivity risk. The results of ex-post rolling-window analyses show that a home bias of 20% up to 40% is a suitable domestic equity investment range for German investors, who currently implement this percentage. We also find that the ex-post minimum variance portfolios perform well in an out-of-sample analysis. They outperform the benchmark indexes and a sole domestic investment.

Suggested Citation

  • Wolfgang Gerke & Ferdinand Mager & Alexander Röhrs, 2005. "Twenty Years of International Diversification from a German Perspective," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 57(2), pages 86-102, April.
  • Handle: RePEc:sbr:abstra:v:57:y:2005:i:2:p:86-102
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    Citations

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    Cited by:

    1. Herz, Christian & Neunert, Daniela & Will, Sebastian & Wolf, Niko J. & Zwick, Tobias, 2012. "Portfolioallokation: Einbezug verschiedener Assetklassen," Bayreuth Working Papers on Finance, Accounting and Taxation (FAcT-Papers) 2012-01, University of Bayreuth, Chair of Finance and Banking.
    2. Doina Maria Rădulescu & Michael Stimmelmayr, 2008. "Die Unternehmensteuerreform 2008: Eine Reformalternative für Deutschland?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 9(1), pages 19-36, February.

    More about this item

    Keywords

    Asset Allocation; Home Bias; International Diversification; Minimum Vari-ance; Portfolio Theory.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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