Diversification with globally integrated US stocks

Thomas Conlon, John Cotter and Ioannis Ropotos

Journal of International Financial Markets, Institutions and Money, 2024, vol. 90, issue C

Abstract: We measure market integration at a firm-level for the US stock market with the rest of the world. The properties of firm-level integration are explored across time and industries and then stocks are sorted into high- and low-integration portfolios. The role of the least globally integrated US stocks in domestic and international portfolio diversification is assessed. We show that these stocks can statistically and economically augment diversification potential, especially after 2000. The same stocks can be combined with the US market index to create a portfolio that performs at least as well as an international index portfolio in terms of risk-adjusted returns and tail risk.

Keywords: Firm-level integration; Integration portfolios; Home-made diversification; Financial services (search for similar items in EconPapers)
JEL-codes: F30 G11 G15 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:90:y:2024:i:c:s1042443123001579

DOI: 10.1016/j.intfin.2023.101889

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