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International Portfolio Diversification and Market Linkages in the presence of regime-switching volatility

Thomas Flavin () and Ekaterini Panopoulou ()

No 150, Money Macro and Finance (MMF) Research Group Conference 2006 from Money Macro and Finance Research Group

Abstract: We examine if the benefits of international portfolio diversification are robust to time-varying asset return volatility. Since diversified portfolios are subject to common cross-country shocks, we focus on the transmission mechanism of such shocks in the presence of regime-switching volatility. We find little evidence of incresaed market interdependence in turbulent periods. Furthermore, for the vast majority of time, we show that risk reduction is delivered for the US investor who holds foreign equit

Keywords: Market comovement; International portfolio diversification; Financial market crises; Regime switching (search for similar items in EconPapers)
JEL-codes: F42 (search for similar items in EconPapers)
Date: 2007-02-02
New Economics Papers: this item is included in nep-rmg
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http://repec.org/mmf2006/up.19839.1148130827.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:mmf:mmfc06:150

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