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International Portfolio Diversification and the 2007 Financial Crisis

In: Advances in Financial Risk Management

Author

Listed:
  • Jacek Niklewski
  • Timothy Rodgers

Abstract

By diversifying stock selection on an international basis, portfolio managers hope to improve the trade-off between risk and reward through a reduction in within-portfolio correlation levels. Although the benefits of this procedure can be considerable, the process of stock selection is not always clear cut. It was argued more than twenty years ago by French and Poterba (1991) that behavioral factors, such as biases in investor expectations, can lead to under-diversification in the international dimension. Portfolio managers wanting to optimize their stock selection can now be seen to face another important issue; namely, whether or not financial crisis results in significant long-term permanent changes in between-market correlation levels.

Suggested Citation

  • Jacek Niklewski & Timothy Rodgers, 2013. "International Portfolio Diversification and the 2007 Financial Crisis," Palgrave Macmillan Books, in: Jonathan A. Batten & Peter MacKay & Niklas Wagner (ed.), Advances in Financial Risk Management, chapter 10, pages 225-252, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-02509-8_10
    DOI: 10.1057/9781137025098_10
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    Cited by:

    1. Pavlo Dziuba & Olena Pryiatelchuk & Denys Rusak, 2021. "Equity Markets Risks And Returns: Implications For Global Portfolio Capital Flows During Pandemic And Crisis Periods," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 7(3).

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