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Are Strategies for International Diversification by Country, Industry and Region Equivalent?

Author

Listed:
  • Rachid Ghilal

    (UQAR - Université du Québec à Rimouski)

  • Ahmed Marhfor

    (UQAT - Université du Québec en Abitibi-Témiscamingue)

  • M'Zali Bouchra

    (UQAM - Université du Québec à Montréal = University of Québec in Montréal)

  • Jean Jacques Lilti

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this study, we examine whether international portfolio diversification still matters despite an increase in the cross-country correlations of assets returns. More specifically, we explain why an increase in global return correlations does not necessarily imply a reduction in the benefits of international portfolio diversification. We also propose to compare empirically two traditional strategies of international diversification (by country and industry) in addition to a new strategy (by region) using two different methodological approaches, namely the mean variance spanning and multivariate cointegration analysis. Over the full sample period (1994- 2008), our results suggest that the three strategies of international diversification remain effective despite the secular increase in the cross-country return correlations. When we divide the sample into two different sub-periods (1994-2000 and 2000-2008), the findings indicate that the strategy based on regional diversification proved to be a new competing strategy during the second period in comparison to the other two traditional strategies.

Suggested Citation

  • Rachid Ghilal & Ahmed Marhfor & M'Zali Bouchra & Jean Jacques Lilti, 2021. "Are Strategies for International Diversification by Country, Industry and Region Equivalent?," Post-Print hal-03885614, HAL.
    • Handle: RePEc:hal:journl:hal-03885614
    DOI: 10.35944/jofrp.2021.10.1.011
    Note: View the original document on HAL open archive server: https://hal.science/hal-03885614v1
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