Download or read book International Diversification Using Cointegration and Modern Portfolio Theory written by Jose Balarezo and published by . This book was released on 2010 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is widely accepted that diversifying internationally is a sound strategy because correlations among securities in different countries are lower as compared to local securities. We argue however, that in some instances, diversifying internationally might not be as effective; therefore, investors need to be careful in choosing where to diversify internationally. For investors with longer time horizons, if countries share common long term movements, the benefits of international diversification will be diminished. We argue that international diversification will benefit investors only in the cases that the home country does not cointegrate with the foreign market. To verify this argument, this paper uses cointegration techniques to investigate long term movements between The U.S. and 15 foreign markets, and then uses country ETFs (Exchange Traded Funds) to build portfolios constructed by combining the findings of the cointegration techniques with Modern Portfolio Theory (MPT) and compares the results against portfolios built solely on MPT. The results clearly support our hypothesis as in more than 90% of the cases tested, the portfolios constructed by combining the findings of our cointegration analysis with the optimization techniques of MPT outperform - in a risk adjusted basis - portfolios constructed only by using the optimization techniques used by MPT.
Download or read book International Diversification with Focus on Cointegration written by Inga Kudzmaite and published by LAP Lambert Academic Publishing. This book was released on 2012 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent globalization and integration of capital markets made international diversification more difficult for many investors and caused correlations between the securities to increase, especially during the times of adverse economic conditions. This paper argues that markets, which have cointegrating relationship and follow common trend in a long time horizon, cannot contribute much to portfolio diversification. Therefore, investors, who are willing to invest for long-term, should rather choose cointegration analysis instead of usual correlation approach for portfolio diversification purposes because the former is more appropriate for long-term. Thus, this paper took a perspective of Lithuanian investor and conducted cointegration analysis with 8 other country equity indices over a period 2000-2011 in order to find out which markets Vilnius OMX is cointegrated with. This paper should be useful to investors who seek to diversify internationally and look for a long-term perspective, and who are willing to go beyond the conventional portfolio diversification methods.
Download or read book Impact of Natural Disasters on Cointegration and Diversification written by Dr. Isha Rawal and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study identifies the impact of three natural disasters on cointegrating relationship among selected world stock market indices. The study further suggests the best international diversification strategy in case of the occurrence of an extreme event from the perspective of an Indian investor. A vast amount of research suggests that international portfolio diversification helps to spread the risk of any adversity occurring in a particular country as the correlations among stocks in various countries are lower as compared to local securities. But the disagreement nevertheless is that in a number of instances, diversifying internationally might not be effective. To fill this research gap, the study employs Johansen multivariate cointegration test to evaluate change in the financial linkages between selected stock market indices during the pre- and post-one year event period for three events to include China Earthquake of 2008, Japan earthquake and tsunami of 2011 and the US Hurricane Sandy of 2012. The study further compares performance of different portfolio diversification strategies, viz., Naive 1/N portfolio construction technique, Markowitz modern portfolio theory and cointegration-based portfolio construction method with the aid of Sharpe's ratio. The study finds that with the help of cointegration analysis, effective portfolio selection can be done to seek maximum diversification benefit.
Download or read book Cointegration and the Gains from International Portfolio Diversification in Bonds and Equities written by I. C. Andrade and published by . This book was released on 1991 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cointegration and the Gains from International Portfolio Diversification in Bonds and Equities written by Isabel C. Andrade and published by . This book was released on 1991 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in International Portfolio Diversification written by Hansoo Kim and published by . This book was released on 2004 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book International Portfolio Diversification written by Theodore Michael Johnson and published by . This book was released on 1989 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Cointegration Study of the Gains from International Portfolio Diversification Into Emerging Stock Markets written by Tim Bradshaw and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Financial Globalization Portfolio Diversification and the Pattern of International Trade written by Miklós Koren and published by International Monetary Fund. This book was released on 2003-12-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper provides a general-equilibrium model where incomplete international financial markets lead to insufficient industrial specialization and low international trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a diversified industrial structure rather than specializing according to their comparative advantage. Financial globalization then induces more specialization and more trade. The present framework yields explicit closed-form solutions for the volume and the structure of trade. Empirical results support the implications of the theory. Trade in financially open countries is (i) higher, (ii) more dependent on productivity differences, and (iii) less sensitive to industry risks.
Download or read book International Diversification of Investment Portfolios written by Cheol S. Eun and published by . This book was released on 1991 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cointegration Causality and International Portfolio Diversification written by Nkululeko Lwazi Msimanga and published by . This book was released on 2010 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book International Diversification Strategies in a Modern Portfolio Context written by Paul Thomas Hession and published by . This book was released on 1990 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book International Portfolio Diversification and Labor leisure Choice written by Urban J. Jermann and published by . This book was released on 1998 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: When marginal utility of consumption depends on leisure, investors will take this into account when allocating their wealth among different assets. This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor-leisure and consumption are chosen endogenously. We use this framework to study the effect of leisure for optimal international diversification. We find that in the symmetric case the model's ability to help explain home-bias depends crucially on the level of substitutability between consumption and leisure.
Download or read book The International Diversification Puzzle when Goods Prices Are Sticky written by Mr.Charles Engel and published by International Monetary Fund. This book was released on 2009-01-01 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some nominal goods prices are sticky. Trade in these assets achieves the same allocations as trade in a complete set of nominal state-contingent claims in our linearized model. When there is a high degree of price stickiness, we show that not much equity diversification is required to replicate the complete-markets equilibrium when agents are able to hedge foreign exchange risk sufficiently. Moreover, temporarily sticky nominal goods prices can have large effects on equity portfolios even when dividend processes are very persistent.
Download or read book Structuring Global Property Portfolios written by John G. Gallo and published by . This book was released on 2013 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We create globally diversified real estate portfolios using cointegration methods over 1992-2009. Cointegration is robust to intertemporal correlation instability, identifies markets that share common factors and long-term trends, and identifies leading markets that do not respond to deviations from equilibrium within each cointegrated region. Our cointegration inspired model portfolios outperform the mean-variance optimized portfolio by 575-725 basis points annually. Differences in performance remain significant over separate time periods, and after controlling for various risk factors. Collectively, the results help clarify property portfolio selection and allocation policy vital for institutional investors and global real estate portfolio managers.
Download or read book Three Essays in International Portfolio Diversification written by Amir Andrew Amadi and published by . This book was released on 2004 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Long run Gains from International Equity Diversification written by David E. Allen and published by . This book was released on 1993 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
