Countries Versus Industries in Europe: A Normative Portfolio Approach

25 Pages Posted: 23 Feb 2005

See all articles by Javier Estrada

Javier Estrada

IESE Business School

Mark Kritzman

Windham Capital Management

Sebastien Page

State Street Associates

Simon Myrgren

State Street Associates

Date Written: February 2005

Abstract

The relative benefits of country diversification and industry diversification are critical for investors, portfolio managers, and investment banks. The unification of Europe has had a substantial impact on these relative benefits and the ultimate goal of this article is to evaluate their temporal evolution. We find that although a country approach outperformed an industry approach in the early 1990s under three different performance measures, the opposite was the case in the late 1990s and early 2000s. We also find that this shift does not seem to be a temporary phenomenon associated with the TMT bubble. Overall, our results validate both the increasing emphasis on industry diversification, as well as the recent reorganization of research departments of investment banks, previously organized along country lines and currently organized along industry lines. There seems to be little question that in Europe industry expertise has become more important than country expertise.

Keywords: Portfolio management, Country versus industries, Europe

JEL Classification: G11

Suggested Citation

Estrada, Javier and Kritzman, Mark and Page, Sebastien and Myrgren, Simon, Countries Versus Industries in Europe: A Normative Portfolio Approach (February 2005). Available at SSRN: https://ssrn.com/abstract=671484 or http://dx.doi.org/10.2139/ssrn.671484

Javier Estrada (Contact Author)

IESE Business School ( email )

IESE Business School
Av. Pearson 21
Barcelona, 08034
Spain
+34 93 253 4200 (Phone)
+34 93 253 4343 (Fax)

Mark Kritzman

Windham Capital Management ( email )

5 Revere Street
Cambridge, MA 02138
United States
617-576-7360 (Phone)
617-576-7359 (Fax)

Sebastien Page

State Street Associates ( email )

138 Mount Auburn Street
Cambridge, MA 02138
United States
617-234-9462 (Phone)
617-234-9478 (Fax)

Simon Myrgren

State Street Associates ( email )

138 Mount Auburn Street
Cambridge, MA 02138
United States

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