IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v01y1998i01ns0219024998000072.html
   My bibliography  Save this article

Internationally Diversified Investment Using an Integrated Portfolio Model

Author

Listed:
  • Hiroshi Konno

    (Department of Industrial Engineering and Management, Tokyo Institute of Technology, 2-12-1 O-okoyama, Meguro-ku, Tokyo 152, Japan)

  • Jing Li

    (Department of Industrial Engineering and Management, Tokyo Institute of Technology, 2-12-1 O-okoyama, Meguro-ku, Tokyo 152, Japan)

Abstract

In this paper, we use a new integrated portfolio model which takes care of stocks and bonds of several countries to construct an internationally diversified portfolio. This serves as an alternative to the popular asset allocation strategy, in which the fund is first allocated to indices corresponding to diverse asset classes and then allocated to individual assets using appropriate models for each asset class. Our model, on the other hand, determines the allocation of the fund to individual assets in one stage by solving a large scale mean-variance or mean-absolute deviation model. Another important feature of this article is a newly developed strategy for hedging the exchange rate risk by using forward contracts on currencies.Computational experiments using historical data collected in the capital market show that the new approach can serve as a more reliable and less expensive method for allocating the fund to diverse classes of assets.

Suggested Citation

  • Hiroshi Konno & Jing Li, 1998. "Internationally Diversified Investment Using an Integrated Portfolio Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 145-160.
    • Handle: RePEc:wsi:ijtafx:v:01:y:1998:i:01:n:s0219024998000072
    DOI: 10.1142/S0219024998000072
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024998000072
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024998000072?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. MacLean, Leonard C. & Foster, Michael E. & Ziemba, William T., 2007. "Covariance complexity and rates of return on assets," Journal of Banking & Finance, Elsevier, vol. 31(11), pages 3503-3523, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:01:y:1998:i:01:n:s0219024998000072. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.