The effectiveness of international diversification: whole markets versus sectors

Imad A. Moosa, George B. Tawadros and Terry A. Hallahan

Applied Economics, 2015, vol. 47, issue 6, 614-622

Abstract: A hedging approach is used to examine the effect of sectoral factors on the effectiveness of international diversification. By using data covering seven countries and various sectors, we find that international diversification is more effective when assets from developed markets only are used and when multiasset portfolios are used instead two-asset portfolios. The results also reveal that international diversification across whole markets is more effective than diversification across sectors. These results reflect the pattern of return correlation.

Date: 2015
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DOI: 10.1080/00036846.2014.978073

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