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Portfolio Diversification in Europe

Author

Listed:
  • Kpate ADJAOUTÉ

    (HSBC Republic Bank (Suisse) SA & FAME)

  • Jean-Pierre DANTHINE

    (HEC-University of Lausanne, CEPR & FAME)

  • Dušan ISAKOV

    (HEC-University of Geneva & FAME)

Abstract

Have the euro and accompanying measures of financial integration had a discernable impact on the degree of diversification of European investors? This is an empirical question that this paper tries to answer by exploring four alternative avenues. First we focus on the final outcome: If European investors are indeed better diversified, their consumption should be increasingly correlated. Second we check more directly what is known about the composition of Europeans’ portfolios. A third perspective focuses on the evolution of returns and prices. If indeed European investors are attempting to exploit new arbitrage opportunities opened up by the euro and European financial integration, then it is likely that these behavioral changes will be matched by significant changes in returns or in the nature of the return generating process. Finally, we explore the possibility that the answer to our question may be better revealed by examining the changes that have taken place in the investment process itself.

Suggested Citation

  • Kpate ADJAOUTÉ & Jean-Pierre DANTHINE & Dušan ISAKOV, 2003. "Portfolio Diversification in Europe," FAME Research Paper Series rp86, International Center for Financial Asset Management and Engineering.
  • Handle: RePEc:fam:rpseri:rp86
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    File URL: http://www.swissfinanceinstitute.ch/rp86.pdf
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    References listed on IDEAS

    as
    1. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
    2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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    Cited by:

    1. Avadanei, Andreea, 2011. "Indicatori de măsurare a integrării financiare europene. Literature review
      [Measuring European financial market integration. A literature review]
      ," MPRA Paper 28737, University Library of Munich, Germany.

    More about this item

    Keywords

    Risk sharing; Portfolio holdings; financial market integration; cross sectional dispersion;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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