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Multinationals and the Gains from International Diversification

Author

Listed:
  • Patrick F. Rowland

    (Fordham University)

  • Linda L. Tesar

    (University of Michigan)

Abstract

This paper employs mean-variance spanning tests to examine the diversification potential of multinational firms and foreign market indices from the perspective of investors in the G7 countries over the 1984-95 period. We find evidence that multinational corporations may have provided diversification benefits for investors in Germany and the United States. We find that the addition of foreign market indices to a domestic portfolio - inclusive of multinationals - provided substantial diversification benefits in all countries. The economic importance of the shift of the portfolio frontier varied considerably across markets. (Copyright: Elsevier)

Suggested Citation

  • Patrick F. Rowland & Linda L. Tesar, 2004. "Multinationals and the Gains from International Diversification," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 789-826, October.
  • Handle: RePEc:red:issued:v:7:y:2004:i:4:p:789-826
    DOI: 10.1016/j.red.2004.05.001
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    More about this item

    Keywords

    Diversification; Spanning; Home Bias; Multinationals;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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