Is portfolio diversification still effective: evidence spanning three crises from the perspective of U.S. investors

Rong Huang, Dimos Kambouroudis and David G. McMillan ()
Additional contact information
Rong Huang: University of Stirling
Dimos Kambouroudis: University of Stirling
David G. McMillan: University of Stirling

Journal of Asset Management, 2025, vol. 26, issue 2, No 1, 115-135

Abstract: Abstract This paper uses over twenty years of data to examine diversification benefits for U.S. investors through assessing different portfolio opportunities, including a stock (60%)-bond (40%) portfolio, an internationally diversified stock portfolio, and a cross-asset diversified portfolio compared with investing only in the U.S. stock market. Our dataset consists of three stock indices (S&P 500, MSCI EAFE, and MSCI EM) and three assets (Gold, Oil, and Bonds). Portfolios are built using both equal- and mean-variance efficient-weights and are compared primarily using the Sharpe ratio. The results indicate that before 2009, U.S. investors could benefit from an internationally diversified stock portfolio. However, since 2009, this international stock portfolio is less likely to benefit U.S. investors. In contrast, the cross-asset diversified portfolio does provide greater benefit and outperforms the U.S only, the stock–bond portfolio, and the international stock portfolio over different time periods. Of note, the mean-variance efficient portfolio weighting outperforms the equal-weighted portfolio. Overall, a portfolio consisting of the S&P500 Index, gold, oil, and U.S. 10-year Treasury Note is the preferred option for U.S. investors.

Keywords: Stocks; Diversification; International; Cross-assets (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41260-025-00398-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:assmgt:v:26:y:2025:i:2:d:10.1057_s41260-025-00398-z

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

DOI: 10.1057/s41260-025-00398-z

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().