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A Note on International Portfolio Diversification with Short Selling

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  • So, Raymond W
  • Tse, Yiuman

Abstract

In this paper, the diversification benefits of using stock index futures are examined. Empirical evidence shows that traditional diversification in international equity markets does not produce a risk adjusted performance superior to the US market. An explanation for this result is that restrictions on short selling prohibit the best allocation of resources when overseas stock markets are riskier and have worse returns. However, when such restrictions are eased for short selling in index futures markets, investors are enabled to both allocate their investments more efficiently and to construct a superior portfolio. Copyright 2001 by Kluwer Academic Publishers

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  • So, Raymond W & Tse, Yiuman, 2001. "A Note on International Portfolio Diversification with Short Selling," Review of Quantitative Finance and Accounting, Springer, vol. 16(4), pages 311-321, June.
    • Handle: RePEc:kap:rqfnac:v:16:y:2001:i:4:p:311-21
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    Cited by:

    1. Sulaiman Al-Jassar & Imad A. Moosa, 2020. "Country Effects, Industry Effects and the Effectiveness of International Diversification Within the GCC Region," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-18, January.
    2. Frank O. Kwabi & Agyenim Boateng & Emmanuel Adegbite, 2019. "International equity portfolio investment and enforcement of insider trading laws: a cross-country analysis," Review of Quantitative Finance and Accounting, Springer, vol. 53(2), pages 327-349, August.
    3. Eunju Lee, 2016. "Short selling and market mispricing," Review of Quantitative Finance and Accounting, Springer, vol. 47(3), pages 797-833, October.
    4. Ephraim Clark & Konstantinos Kassimatis, 2013. "International equity flows, marginal conditional stochastic dominance and diversification," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 251-271, February.
    5. Paul Chiou & Cheng-Few Lee, 2013. "Do investors still benefit from culturally home-biased diversification? An empirical study of China, Hong Kong, and Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 341-381, February.

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