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Countries versus industries in Europe: A normative portfolio approach

Author

Listed:
  • Javier Estrada

    (IESE Business School)

  • Mark Kritzman
  • Simon Myrgren
  • Sébastien Page

Abstract

The relative benefits of country diversification and industry diversification are critical for investors, portfolio managers and investment banks. The unification of Europe has had a substantial impact on these relative benefits and the ultimate goal of this paper is to evaluate their temporal evolution. It is found that, although a country approach outperformed an industry approach in the early 1990s under three different performance measures, the opposite was the case in the late 1990s and early 2000s. It is also found that this shift does not seem to be a temporary phenomenon associated with the TMT bubble. Overall, the results validate both the increasing emphasis on industry diversification and the recent reorganisation of research departments of investment banks, previously organised along country lines and currently organised along industry lines. There seems to be little question that, in Europe, industry expertise has become more important than country expertise.

Suggested Citation

  • Javier Estrada & Mark Kritzman & Simon Myrgren & Sébastien Page, 2005. "Countries versus industries in Europe: A normative portfolio approach," Journal of Asset Management, Palgrave Macmillan, vol. 6(2), pages 85-103, August.
    • Handle: RePEc:pal:assmgt:v:6:y:2005:i:2:d:10.1057_palgrave.jam.2240168
    DOI: 10.1057/palgrave.jam.2240168
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    Citations

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    Cited by:

    1. Kenneth David Strang, 2012. "Man versus math: Behaviorist exploration of post-crisis non-banking asset management," Journal of Asset Management, Palgrave Macmillan, vol. 13(5), pages 348-367, October.
    2. Joliet, Robert & Hubner, Georges, 2008. "Corporate international diversification and the cost of equity: European evidence," Journal of International Money and Finance, Elsevier, vol. 27(1), pages 102-123, February.
    3. Vivek Bhargava & Akash Dania & Davinder Kumar Malhotra, 2012. "Industry effects and volatility transmission in portfolio diversification," Journal of Asset Management, Palgrave Macmillan, vol. 13(1), pages 22-33, February.
    4. Bley, Jorg, 2009. "European stock market integration: Fact or fiction?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 759-776, December.

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