The Performance of International Equity Portfolios

53 Pages Posted: 14 Jul 2006 Last revised: 27 Sep 2010

See all articles by Charles P. Thomas

Charles P. Thomas

Thomas & Son Analytics

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

Jon Wongswan

Phatra Securities

Multiple version iconThere are 2 versions of this paper

Date Written: July 2006

Abstract

This paper evaluates the ability of U.S. investors to allocate their foreign equity portfolios across 44 countries over a 25-year period. We find that U.S. portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We test whether this strong performance owed to trading expertise or longer-term allocation expertise. The evidence is overwhelmingly against trading expertise. While U.S. investors did abstain from momentum trading and instead sold past winners, we find no evidence that these past winners subsequently underperformed. In addition, conditional performance measures, which directly test reallocating into (out of) markets that subsequently outperformed (underperformed), suggest no significant trading expertise. In contrast, we offer strong evidence of longer-term allocation expertise: If we fix portfolio weights at the end of 1989 and do not allow reallocations, we still find superior performance in the recent period.

Suggested Citation

Thomas, Charles P. and Warnock, Francis E. and Wongswan, Jon, The Performance of International Equity Portfolios (July 2006). NBER Working Paper No. w12346. Available at SSRN: https://ssrn.com/abstract=913309

Charles P. Thomas (Contact Author)

Thomas & Son Analytics ( email )

5409 Center St
Chevy Chase, MD 20815
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2022075834 (Phone)

Francis E. Warnock

University of Virginia - Darden Business School ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-6076 (Phone)

HOME PAGE: http://faculty.darden.virginia.edu/warnockf/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138-5398

Jon Wongswan

Phatra Securities ( email )

11F Muang Thai-Phatra Office Tower 1
252/6 Ratchadapisek Road
Bangkok, 10400
Thailand

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