Nowhere to Run, Nowhere to Hide: Asset Diversification in a Flat World

70 Pages Posted: 9 May 2018

See all articles by John Cotter

John Cotter

University College Dublin; University of California, Los Angeles (UCLA) - Anderson School of Management

Stuart Gabriel

University of California, Los Angeles (UCLA)

Richard Roll

California Institute of Technology

Multiple version iconThere are 2 versions of this paper

Date Written: April 24, 2018

Abstract

We estimate trends in diversification for equity, debt, and real estate within and across countries. After 2000, we uncover a marked and near ubiquitous decline in diversification, which coincides with sharply higher levels of investment risk. This decline is associated with country economic development and internet diffusion. Diversification also waned temporarily during the 1992 ERM and 2009-2010 European sovereign debt crises. The results are robust to controls for macro- financial and market liquidity influences and proxies for economic, political, and financial risks; they offer a cautionary note regarding asset class and geographic diversification of investment risk in an increasingly flat world.

Keywords: asset return integration and diversification, equities, fixed income, real estate, economic development

JEL Classification: G01, G10, G11, G12, G14, G15

Suggested Citation

Cotter, John and Gabriel, Stuart and Roll, Richard W., Nowhere to Run, Nowhere to Hide: Asset Diversification in a Flat World (April 24, 2018). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 18-3. Available at SSRN: https://ssrn.com/abstract=3175597 or http://dx.doi.org/10.2139/ssrn.3175597

John Cotter (Contact Author)

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Stuart Gabriel

University of California, Los Angeles (UCLA) ( email )

Richard W. Roll

California Institute of Technology ( email )

1200 East California Blvd
Mail Code: 228-77
Pasadena, CA 91125
United States
626-395-3890 (Phone)
310-836-3532 (Fax)

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