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The Effect of Extreme Markets on the Benefits of International Portfolio Diversification

Author

Listed:
  • Daniella Acker

    (University of Bristol, U.K.)

  • Nigel W. Duck

    (University of Bristol, U.K.)

Abstract

We investigate the effects of bull and bear markets on correlations between developed and emerging country equity returns, and on the benefits of combining international markets in a portfolio. Contrary to most other studies we find that correlations fall in both bull and bear markets, although far more in the former; that emerging markets provide both additional diversification benefits for investors in developed markets and, especially, some protection during bear markets.

Suggested Citation

  • Daniella Acker & Nigel W. Duck, 2009. "The Effect of Extreme Markets on the Benefits of International Portfolio Diversification," Multinational Finance Journal, Multinational Finance Journal, vol. 13(3-4), pages 155-188, September.
    • Handle: RePEc:mfj:journl:v:13:y:2009:i:3-4:p:155-188
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    Citations

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    Cited by:

    1. Stephen Matteo Miller, 2012. "Booms and Busts as Exchange Options," Multinational Finance Journal, Multinational Finance Journal, vol. 16(3-4), pages 189-223, September.

    More about this item

    Keywords

    International equity markets; correlations; portfolio choice;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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