What explains the benefits of international portfolio diversification?

Najah Attig, Omrane Guedhami, Gregory Nazaire and Oumar Sy

Journal of International Financial Markets, Institutions and Money, 2023, vol. 83, issue C

Abstract: This study uses a large sample of international stocks to examine the sources of the benefits of international portfolio diversification. It finds not only that international diversification outperformed industrial diversification over the past 27 years, but also that the gains from international diversification derive primarily from mitigating market, political, and inflation risks. Economic risk appears important for investors giving more weight to smaller countries, while financial risk appears more important to funds limited to large countries. Risks related to the quality of the legal and credit environments seem less important for international diversification.

Keywords: International portfolio diversification; Industrial diversification; Market risk; Political risk; Economic risk; Developed markets; Emerging markets (search for similar items in EconPapers)
JEL-codes: F30 F37 F65 G11 G12 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:83:y:2023:i:c:s1042443122002013

DOI: 10.1016/j.intfin.2022.101729

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