Portfolio Diversification in Europe

FAME Working Paper No. 86

47 Pages Posted: 23 Jul 2003

See all articles by Kpate Adjaoute

Kpate Adjaoute

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Jean-Pierre Danthine

University of Lausanne - Institute of Banking and Finance (IBF); Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Dušan Isakov

University of Fribourg - Faculty of Economics and Social Science

Date Written: April 2003

Abstract

Have the euro and accompanying measures of financial integration had a discernable impact on the degree of diversification of European investors? This is an empirical question that this paper tries to answer by exploring four alternative avenues. First we focus on the final outcome: If European investors are indeed better diversified, their consumption should be increasingly correlated. Second we check more directly what is known about the composition of Europeans' portfolios. A third perspective focuses on the evolution of returns and prices. If indeed European investors are attempting to exploit new arbitrage opportunities opened up by the euro and European financial integration, then it is likely that these behavioral changes will be matched by significant changes in returns or in the nature of the return generating process. Finally, we explore the possibility that the answer to our question may be better revealed by examining the changes that have taken place in the investment process itself.

Keywords: Risk sharing, Portfolio holdings, financial market integration, cross sectional dispersion

JEL Classification: F2, F36, G15

Suggested Citation

Adjaoute, Kpate and Danthine, Jean-Pierre and Isakov, Dušan, Portfolio Diversification in Europe (April 2003). FAME Working Paper No. 86, Available at SSRN: https://ssrn.com/abstract=423180 or http://dx.doi.org/10.2139/ssrn.423180

Kpate Adjaoute

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
+41 21 729 4711 (Phone)
+41 21 729 4711 (Fax)

Jean-Pierre Danthine (Contact Author)

University of Lausanne - Institute of Banking and Finance (IBF) ( email )

Lausanne, 1015
Switzerland
+41 21 692 3485 (Phone)
+41 21 692 3335 (Fax)

HOME PAGE: http://www.hec.unil.ch/jdanthine/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Dušan Isakov

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

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