Exploring the diversification benefits of US international equity closed-end funds

Jonathan Fletcher ()
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Jonathan Fletcher: University of Strathclyde

Financial Markets and Portfolio Management, 2022, vol. 36, issue 3, No 2, 297-320

Abstract: Abstract I use the simulation approach of Jobson and Korkie (J Portfolio Manag 7:70–74, 1981), combined with Michaud optimization (Michaud and Michaud, Efficient asset management: a practical guide to stock portfolio optimization and asset allocation, Oxford University Press, Oxford, 2008), to evaluate whether US international equity closed-end funds (CEF) provide out-of-sample diversification benefits. My study finds that international CEF do not provide diversification benefits across the whole sample period. However, the out-of-sample diversification benefits of international CEF do vary across economic states. I find that there are significant diversification benefits when the lagged one-month US Treasury Bill return is lower than normal, and when higher than normal, regardless of the benchmark investment universe used.

Keywords: Diversification benefits; Resampled portfolio efficiency™; Closed-end funds (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11408-021-00397-1

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