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Unexploited Gains From International Diversification: Patterns Of Portfolio Holdings Around The World

Tatiana Didier (), Roberto Rigobon () and Sergio Schmukler

The Review of Economics and Statistics, 2013, vol. 95, issue 5, 1562-1583

Abstract: Using unique data on mutual fund portfolios with different investment scopes, we study the extent of international diversification. Mutual funds invest in a surprisingly limited number of stocks—about 100. The number of holdings from a given region declines as the investment scope broadens. Moreover, unexploited gains exist from international diversification. Funds that invest globally could achieve better risk-adjusted returns by adding stocks held by more specialized funds within the same family. These findings are not driven by different sectoral allocations, lack of information or instruments, transaction costs, or different tail risks. Instead, organizational factors might play an important role. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: financial integration; firm organization; globalization; international asset allocation; mutual fund portfolios; risk diversification (search for similar items in EconPapers)
JEL-codes: F30 F36 G11 G15 G23 L20 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Unexploited gains from international diversification: patterns of portfolio holdings around the world (2011) Downloads
Working Paper: Unexploited Gains from International Diversification: Patterns of Portfolio Holdings Around the World (2010) Downloads
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