Does International Diversification Pay?

Posted: 4 May 2013

See all articles by Vivek Bhargava

Vivek Bhargava

Alcorn State University

Daniel Konku

Northern Michigan University

Davinder K. Malhotra

Thomas Jefferson University

Date Written: 2004

Abstract

Advances in computer and telecommunications technology have contributed to the emergence of more integrated global financial markets, allowing for the dissemination of information and the execution of transactions on a real-time basis around the clock and around the globe. To determine if an investor can gain additional diversification benefits by investing in today's increasingly integrated global financial markets, returns on four different indexes — Standard & Poor's Composite 500 (S&P 500); Morgan Stanley Capital International (MSCI) World Index; Europe, Australia, and Far East (EAFE) Index; and the MSCI Europe Index — are analyzed for a 22-year period, from 1978 to 2000. Although the benefits from international diversification are decreasing, an investor is better off investing a portion of his or her portfolio in international markets, especially the European markets.

Keywords: Diversification, Mutual fund selection, Risk reduction

Suggested Citation

Bhargava, Vivek and Konku, Daniel and Malhotra, Davinder K., Does International Diversification Pay? (2004). Journal of Financial Counseling and Planning, Vol. 15, No. 1, 2004. Available at SSRN: https://ssrn.com/abstract=2260485

Vivek Bhargava (Contact Author)

Alcorn State University ( email )

15 Campus Drive
Natchez, MS 39120
United States
601-304-4319 (Phone)
601-304-4350 (Fax)

Daniel Konku

Northern Michigan University ( email )

Marquette, MI 49855
United States
906 227 2930 (Fax)

Davinder K. Malhotra

Thomas Jefferson University ( email )

Schoolhouse Lane and Henry Avenue
School of Business Administration
Philadelphia, PA 19144
United States

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