International Portfolio Diversification Benefits in Periods of Crises

19 Pages Posted: 26 Sep 2011 Last revised: 6 Feb 2012

See all articles by Ons Bouslama

Ons Bouslama

LEFA-IHEC Carthage

Olfa Ben Ouda

LEFA-IHEC Carthage

Date Written: September 25, 2011


This paper studies the benefits of international portfolio diversification in a context of growing market correlation and crises occurrence. Different investment strategies employing different risk measures (standard variance, GARCH variance, CVaR, LPM (2,3,4,5)) are used to assess the robustness of international diversification benefits. Equity returns from 41 countries, are used including both developed and emerging markets, over the period 1988-2009 which has been characterized by increasing market correlations. Our empirical results show that international diversification benefits can still be substantial despite the growing market correlations even in crises periods. We find similar results using both restricted and unrestricted portfolio optimization techniques. We conclude that emerging markets are an important source of diversification benefits only when combined with developed markets. Our results highlight the importance of the USA, Jordan and Nigeria indexes in efficient portfolios. Furthermore, we find no evidence that the use of a specific risk measure dominates all the times when it comes to portfolio selection. In particular, unlike previous evidence, our results do not support the dominance of “survival risk” measures during crises periods.

Keywords: diversification benefits, crises periods, CVaR, LPM(n), variance, GARCH variance, portfolio optimizations

Suggested Citation

Bouslama, Ons and Ben Ouda, Olfa, International Portfolio Diversification Benefits in Periods of Crises (September 25, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: or

Ons Bouslama (Contact Author)

LEFA-IHEC Carthage ( email )

Carthage, Tunis 2016

Olfa Ben Ouda

LEFA-IHEC Carthage

Carthage, Tunis 2016

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