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Twenty Years of International Diversification from a German Perspective

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  • Wolfgang Gerke
  • Ferdinand Mager
  • Alexander Röhrs
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    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.

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    Bibliographic Info

    Article provided by LMU Munich School of Management in its journal Schmalenbach Business Review.

    Volume (Year): 57 (2005)
    Issue (Month): 2 (April)
    Pages: 86-102

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    Handle: RePEc:sbr:abstra:v:57:y:2005:i:2:p:86-102

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    Related research

    Keywords: Asset Allocation; Home Bias; International Diversification; Minimum Vari-ance; Portfolio Theory.;

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    Cited by:
    1. 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, 02.

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