Nowhere to Run, Nowhere to Hide - Asset Diversification in a Flat World

John Cotter, Stuart Gabriel and Richard Roll
Additional contact information
Richard Roll: California Institute of Technology, Pasadena, CA

No 201909, Working Papers from Geary Institute, University College Dublin

Abstract: We estimate trends in diversification potential for equity, debt, and real estate within and across asset classes and countries. After 2000, we uncover a marked and near ubiquitous decline in diversification potential, which coincides with sharply higher levels of investment risk. This decline is associated with gains in market liquidity, country economic development, and internet diffusion. Diversification potential also waned temporarily during the 1992 ERM and 2009-2010 European sovereign debt crises. The results are robust to controls for macro-financial influences, investor sentiment, and proxies for economic, political, and financial risks. Findings offer a cautionary note regarding asset class and geographic diversification of investment risk in an increasingly flat world.

Keywords: asset return integration and diversification; equities; fixed income; real estate; economic development (search for similar items in EconPapers)
JEL-codes: G01 G10 G11 G12 G14 G15 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2019-05-22
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201909.pdf First version, 2019 (application/pdf)

Related works:
Working Paper: Nowhere to run, nowhere to hide: asset diversification in a flat world (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:201909

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