The Performance of International Equity Portfolios
Charles Thomas ()
The Institute for International Integration Studies Discussion Paper Series from IIIS
This paper evaluates the ability of U.S. investors to allocate their foreign equity portfolios across 44 countries over a 25-year period. We find that U.S. portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We test whether this strong performance owed to trading expertise or longer-term allocation expertise. The evidence is overwhelmingly against trading expertise. While U.S. investors did abstain from momentum trading and instead sold past winners, we find no evidence that these past winners subsequently underperformed. In addition, conditional performance measures, which directly test reallocating into (out of) markets that subsequently outperformed (underperformed), suggest no significant trading expertise. In contrast, we offer strong evidence of longer-term allocation expertise: If we fix portfolio weights at the end of 1989 and do not allow reallocations, we still find superior performance in the recent period.
Keywords: momentum; contrarian; conditional performance measures; equities; home bias (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
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Working Paper: The Performance of International Equity Portfolios (2006)
Working Paper: The Performance of International Equity Portfolios (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:iis:dispap:iiisdp162
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