On the robustness of international portfolio diversification benefits to regime-switching volatility

Thomas Flavin and Ekaterini Panopoulou

Journal of International Financial Markets, Institutions and Money, 2009, vol. 19, issue 1, 140-156

Abstract: We examine if the benefits of international portfolio diversification are robust to time-varying asset return volatility. Since diversified portfolios are subject to common cross-country shocks, we focus on the transmission mechanism of such shocks in the presence of regime-switching volatility. Generally, market linkages are stable with little evidence of increased market interdependence in turbulent periods. Furthermore, risk reduction is consistently delivered for the US investor who holds foreign equity.

Keywords: Market; comovement; Shift; contagion; Financial; market; crises; International; portfolio; diversification; Regime; switching (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (14)

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Working Paper: On the robustness of international portfolio diversification benefits to regime-switching volatility (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:19:y:2009:i:1:p:140-156

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