International portfolio diversification is better than you think

Coeurdacier, Nicolas; Guibaud, Stéphane

doi:10.1016/j.jimonfin.2010.10.003

Cited by 87 publications

(47 citation statements)

References 86 publications

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“…Vermeulen (2013) demonstrates a strong negative relationship between foreign equity holdings and stock market correlations during the recent financial crisis. This stresses the importance of new markets for effective diversification, as advocated by Coerdacier and Guibaud (2011).…”

Section: Literature Reviewmentioning

confidence: 95%

Diversification with volatility products

Alexander

Korovilas²,

Kapraun

2016

Journal of International Money and Finance

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Recent changes to clearing-house regulations have promoted exchange-traded products offering risk premia previously accessible only over-the-counter. Thus, as correlations increase between equity, bonds and commodities, a new strand of research questions the benefits of home-grown diversification using volatility products. First we ask: "What expected returns will induce equity and bond investors to perceive ex-ante diversification benefits from adding volatility?" We call this the optimal diversification threshold. We derive the theoretical thresholds for minimum-variance, mean-variance and Black-Litterman optimization. Empirical analysis of US and European markets shows that volatility diversification is frequently perceived to be optimal, ex-ante, but these apparent benefits are almost never realized, being eroded by high roll and transaction costs. Exchange-traded volatility only proved an effective diversifier during the banking crisis. At other times long equity and bond portfolios diversified with volatility futures have not performed as well as those without diversification, or even those diversified with commodities.JEL classification: G11, G15, G23

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Section: Literature Reviewmentioning

confidence: 95%

Diversification with volatility products

Alexander

Korovilas²,

Kapraun

2016

Journal of International Money and Finance

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“…Laopodis (2005) argued that analysts said that financial integration among global capital markets has reduced IPD's benefits by increasing the correlation between equity markets. Coeurdacier and Guibaud (2011) argue that both theories and empirical evidence suggest that financial integration between countries has a positive impact on the correlation between equity markets, which tends to reduce IPD's benefits. The economic gains from international equity diversification are still substantial despite the growing markets correlation (Bouslama & Ouda, 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

The Contribution of African Capital Markets in the Diversification of European Investment Portfolios

Barreto¹

2018

IJEF

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This study aims to evaluate the contribution of the African capital markets in the diversification of European investment portfolios. The study used the methodology based on the application of optimization models like Mean Variance (MV), Resample Michaud (RM), SemiVariance (SV), Mean Absolute Deviation (MAD) and Filtered Historical Simulation (FHS). In-Sample and Out-of-Sample approaches were used to analyze the data. The study results suggested the existence of a strong correlation between some African capital markets and European capital markets, that is, they tend to move in the same direction. The most important being the diversification of global portfolio with assets of African capital markets generate benefits for both types of investors; that is, it provides benefits in the return and reduce investment risk. Still, the study result suggested that the foreign investors should look for an African capital markets with a chance to maximize their wealth and diversify the investment risk in their portfolios. In the same order, the study result went further to elaborate contribute to on the advantage of the international diversification and furthermore contribute to the literature through application of the Filtered Historical Simulation (FHS) method in the optimization portfolio. This methodology, In addition to producing good results, is more restrained in the composition of investment portfolios than the other methods.

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“…Laopodis (2005) argued that analysts is of the opininon that financial integration among global capital markets has reduced IPD's benefits by increasing the correlation between equity markets. Coeurdacier and Guibaud (2011) argue that both theories and empirical evidence suggest that financial integration between countries has a positive impact on the correlation between equity markets, which tends to reduce IPD's benefits. The economic gains from international equity diversification are still substantial despite the growing markets correlation (Bouslama and Ouda, 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

The contribution of the African capital markets in the diversification of investment global portfolios

Barreto¹

2017

Afr. J. Bus. Manage.

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This study aims to evaluate the contribution of the African capital markets in the diversification of investment global portfolios. The study used the methodology based on the application of optimization models like mean variance (MV), resample michaud (RM), semi variance (SV), mean absolute deviation (MAD), and filtered historical simulation (FHS). In-sample and out-of-sample approaches were used to analyze the data. The study results suggested the existence of a strong correlation between some African capital markets and global capital markets, that is, they tend to move in the same direction. The most important being the diversification of global portfolio with assets of African capital markets generate benefits for both types of investors, risk averse and taker investors; that is, it provides benefits in the return and reduce investment risk. Still, the study results suggested that the foreign investors should look for African capital markets with a chance to maximize their wealth and diversify the investment risk in their portfolios. In the same order, the study result went further to elaborate on the advantages of the international diversification and furthermore contributes to the literature through application of the FHS method in the optimization portfolio. This methodology in addition to producing good results, is more restrained in the composition of investment portfolios than the other methods.

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International portfolio diversification is better than you think

Cited by 87 publications

References 86 publications

Diversification with volatility products

Diversification with volatility products

The Contribution of African Capital Markets in the Diversification of European Investment Portfolios

The contribution of the African capital markets in the diversification of investment global portfolios

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