The Persistency of International Diversification Benefits: The Role of The Asymmetry Volatility Model

Ung Sze Nie, Choo Wei Chong, Murali Sambasivan and Annuar Md Nassir
Additional contact information
Ung Sze Nie: Graduate School of Management, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia
Choo Wei Chong: Department of Management and Marketing, Faculty of Economics and Management, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia
Murali Sambasivan: Taylor's Business School, Taylor's University Lakeside Campus, 1 Jalan Taylor’s, 47500 Subang Jaya, Malaysia

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2014, vol. 10, issue 1, 152-165

Abstract: This study restates the issue of international portfolio diversification benefits by considering the problem of perfect foresight assumption and constant variancecovariance estimation. Whilst emphasising the role of the asymmetry volatility model in portfolio formation, we also investigate the economic implication of the smooth transition exponential smoothing (STES) method in portfolio risk management. Our results suggest that all portfolios perform better in the ex-post period compared to the ex-ante period. However, investors may not be able to obtain any benefits from diversifying their portfolio in developed stock markets in both ex-ante and ex-post periods. Further investigation on the economic implications of the STES method also show that the STES method does help to cushion losses generated from the international diversification portfolio. Hence, this suggests the use of the STES method in computing and monitoring the risk of an internationally diversified portfolio.

Keywords: international portfolio diversification (IPD) benefits; smooth transition exponential smoothing (STES); ex-post; ex-ante; asymmetry volatility model (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://web.usm.my/journal/aamjaf/vol%2010-1-2014/A ... 7-G1%20(151-165).pdf (application/pdf)

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:usm:journl:aamjaf01001_152-165

Access Statistics for this article

More articles in Asian Academy of Management Journal of Accounting and Finance (AAMJAF) from Penerbit Universiti Sains Malaysia Contact information at EDIRC.
Bibliographic data for series maintained by Journal Division, Penerbit Universiti Sains Malaysia ().