The existence of country-specific risk factors that could be mitigated by international investment is investigated. An innovative methodology for quantifying the benefits of international diversification is also proposed and tested. In order to overcome many of the problems that arise in the study of international diversification, the analysis is restricted to the equity markets of the Eurozone. The results clearly show the benefits of international equity diversification, even in close economies. The introduction of constraints on short selling significantly reduces these benefits. For asset managers and practitioners, the analysis shows unambiguously that, despite the economic and monetary union and notwithstanding the high degree of correlation between the European markets, opportunities for diversification into the national stock markets of the Eurozone still exist. There is, furthermore, a significant country-specific source of risk that can be hedged via the use of non-domestic diversification.

Country-Specific Risk Diversification through Internationa Equity Portfolios

PIZZUTILO, FABIO
2010-01-01

Abstract

The existence of country-specific risk factors that could be mitigated by international investment is investigated. An innovative methodology for quantifying the benefits of international diversification is also proposed and tested. In order to overcome many of the problems that arise in the study of international diversification, the analysis is restricted to the equity markets of the Eurozone. The results clearly show the benefits of international equity diversification, even in close economies. The introduction of constraints on short selling significantly reduces these benefits. For asset managers and practitioners, the analysis shows unambiguously that, despite the economic and monetary union and notwithstanding the high degree of correlation between the European markets, opportunities for diversification into the national stock markets of the Eurozone still exist. There is, furthermore, a significant country-specific source of risk that can be hedged via the use of non-domestic diversification.
2010
978-960-466-061-2
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11586/53091
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact