Who benefits more from global diversification? An over-time perspective

Abstract

This chapter investigates the relative magnitude of the benefits of global diversification from the viewpoint of domestic investors in various countries by forming time-rolling efficient frontiers. To enhance feasibility of asset allocation strategies, the constraints of short-sales and over-weighting investments are taken into account. The empirical results suggest that local investors in less developed countries, particularly in Latin America, East Asia, and Southern Europe, comparatively benefit more from global diversification. Investors in the countries of civic-law origin tend to benefit more from global investment than the ones in the common-law states. Although the global market has become more integrated over the past decades, diversification benefits for domestic investors declined but did not vanish. The results of this chapter are useful for asset management professionals to determine target markets to promote the sales of international funds.

Citation

Paul Chiou, W.-J. (2008), "Who benefits more from global diversification? An over-time perspective", Chen, A.H. (Ed.) Research in Finance (Research in Finance, Vol. 24), Emerald Group Publishing Limited, Leeds, pp. 129-167. https://doi.org/10.1016/S0196-3821(07)00206-7