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On the robustness of international portfolio diversification benefits to regime-switching volatility

Flavin, Dr. Thomas and Panopoulou, Dr. Ekaterini (2007) On the robustness of international portfolio diversification benefits to regime-switching volatility. UNSPECIFIED. (Unpublished)

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Abstract

We examine if the benefits of international portfolio diversification are robust to time-varying asset return volatility. Since diversified portfolios are subject to common cross-country shocks, we focus on the transmission mechanism of such shocks in the presence of regime-switching volatility. Generally, market linkages are stable with little evidence of increased market interdependence in turbulent periods. Furthermore, risk reduction is consistently delivered for the US investor who holds foreign equity.

Item Type: Other
Additional Information: Part of the Department of Economics Working Paper Series
Keywords: Market comovement; Shift contagion; Financial market crises; International portfolio diversification; Regime switching.
Subjects: Social Sciences > Economics
Item ID: 730
Depositing User: Ms Sandra Doherty
Date Deposited: 12 Oct 2007
Refereed: No
URI:

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