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The Performance of International Equity Portfolios

Listed author(s):
  • Thomas, Charles P.
  • Warnock, Francis E.
  • Wongswan, Jon

This paper evaluates the performance of U.S. investors' portfolios in the equities of over 40 countries over a 25-year period. We find that these portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We uncover three potential reasons for this success. First, U.S. investors abstained from momentum trading and instead sold past winners. Second, conditional performance tests provide no evidence that the superior (unconditional) performance owed to private information, suggesting that the successful exploitation of publicly available information played a role. Third, the documented preference for cross-listed and well-governed foreign firms appears to have served U.S. investors well. We conclude with a short discussion of the implications of our findings for the home bias literature.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 817.

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Length: 54 pages
Date of creation: 2004
Date of revision: Oct 2004
Handle: RePEc:fip:fedgif:817
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