Twenty Years of International Equity Investing
16 Pages Posted: 9 Feb 2014
Date Written: 1996
International equity portfolio diversification is now well accepted by investors around the world. It was a novel concept, and perceived as unusually risky, when proposed originally in the Journal by Bergstrom (1975). In the twenty years since, many other writers have described the risk reduction and return enhancement of carefully diversifying portfolios across different international equity markets. A comprehensive summary of the extensive literature appears in Solnik (1988).
In these two decades, the benefits of global portfolio diversification have been largely accepted by the academic and professional investment communities. At this point, it is of interest to consider two critical questions: 1. Has international equity diversification achieved it original objectives of raising return per unit of risk for U.S.-based and other global investors? 2. What new routes are open to future global investors?
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