Where to Hide in Bad Times: Or Should One Still Diversify Internationally?

Reference : Where to Hide in Bad Times: Or Should One Still Diversify Internationally?


	Document type :	Scientific congresses, symposiums and conference proceedings : Unpublished conference
	Discipline(s) :	Business & economic sciences : Finance
	Focus Areas :	Finance
	To cite this reference:	http://hdl.handle.net/10993/31019

Title :	Where to Hide in Bad Times: Or Should One Still Diversify Internationally?
Language :	English
Author, co-author :	Stefanova, Denitsa [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF) >]
	Elkamhi, Redouane [University of Toronto - U of T]
Publication date :	2017
Peer reviewed :	Yes
Event name :	20th ANNUAL CONFERENCE OF THE SWISS SOCIETY FOR FINANCIAL MARKET RESEARCH (SGF CONFERENCE 2017)
Event date :	31-03-2017
Event place (city) :	Zurich
Event country :	Switzerland
Keywords :	[en] Asset Allocation ; Dynamic Correlations ; Asymmetric Dependence
Abstract :	[en] Among the stylized features of international equity markets is the pronounced asymmetric nonlinear dependence and upward trend in correlations. Such features call into question investors' efforts to diversify internationally. We propose a model to capture those well understood characteristics of international equity index returns. Casting them in a dynamic portfolio problem, we evaluate the gains for a home-biased investor from including foreign assets in her portfolio. We find that accounting for the optimal dynamic demand for hedging on top of a standard mean-variance portfolio policy brings substantial benefits from international portfolio exposure. Such benefits become increasingly sizeable over long investment horizons.
Permalink :	http://hdl.handle.net/10993/31019
Other URL :	https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2812623

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