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Geographic versus industry diversification: Constraints matter

  • Ehling, Paul
  • Ramos, Sofia B.

This research addresses whether geographic diversification provides benefits over industry diversification. In the absence of constraints, no empirical evidence is found to support the argument that country diversification is superior. With short-selling constraints, however, the geographic tangency portfolio is not attainable by industry portfolios. Results with upper and lower constraints on portfolio weights as well as an out-of-sample analysis show that geographic diversification almost consistently outperforms industry portfolios, although we cannot establish statistical significance. JEL Classification: G11, G15

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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 13 (2006)
Issue (Month): 4-5 (October)
Pages: 396-416

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Handle: RePEc:eee:empfin:v:13:y:2006:i:4-5:p:396-416
Contact details of provider: Web page: http://www.elsevier.com/locate/jempfin

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