International Portfolio Diversification and the 2007 Financial Crisis

Jacek Niklewski, Timothy Rodgers

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

By diversifying stock selection on an international basis, portfolio managers hope to improve the trade-off between risk and reward through a reduction in within-portfolio correlation levels. Although the benefits of this procedure can be considerable, the process of stock selection is not always clear cut. It was argued more than twenty years ago by French and Poterba (1991) that behavioral factors, such as biases in investor expectations, can lead to under-diversification in the international dimension. Portfolio managers wanting to optimize their stock selection can now be seen to face another important issue; namely, whether or not financial crisis results in significant long-term permanent changes in between-market correlation levels.
Original languageEnglish
Title of host publicationAdvances in Financial Risk Management
Subtitle of host publicationCorporates, Intermediaries and Portfolios
EditorsJonathan A. Batten, Peter MacKay, Niklas Wagner
Place of PublicationBasingstoke
PublisherPalgrave Macmillan UK
Pages225-252
Number of pages28
ISBN (Print)978-1-137-02508-1
DOIs
Publication statusPublished - 2013

Fingerprint

Stock selection
Financial crisis
International portfolio diversification
Managers
Investors
Trade-offs
Diversification
Factors
Reward

Keywords

  • Financial crisis
  • Portfolio selection
  • Structural change
  • Correlation dynamics
  • GARCH

Cite this

Niklewski, J., & Rodgers, T. (2013). International Portfolio Diversification and the 2007 Financial Crisis. In J. A. Batten, P. MacKay, & N. Wagner (Eds.), Advances in Financial Risk Management: Corporates, Intermediaries and Portfolios (pp. 225-252). Basingstoke: Palgrave Macmillan UK. https://doi.org/10.1057/9781137025098_10

International Portfolio Diversification and the 2007 Financial Crisis. / Niklewski, Jacek; Rodgers, Timothy.

Advances in Financial Risk Management: Corporates, Intermediaries and Portfolios. ed. / Jonathan A. Batten; Peter MacKay; Niklas Wagner. Basingstoke : Palgrave Macmillan UK, 2013. p. 225-252.

Research output: Chapter in Book/Report/Conference proceedingChapter

Niklewski, J & Rodgers, T 2013, International Portfolio Diversification and the 2007 Financial Crisis. in JA Batten, P MacKay & N Wagner (eds), Advances in Financial Risk Management: Corporates, Intermediaries and Portfolios. Palgrave Macmillan UK, Basingstoke, pp. 225-252. https://doi.org/10.1057/9781137025098_10
Niklewski J, Rodgers T. International Portfolio Diversification and the 2007 Financial Crisis. In Batten JA, MacKay P, Wagner N, editors, Advances in Financial Risk Management: Corporates, Intermediaries and Portfolios. Basingstoke: Palgrave Macmillan UK. 2013. p. 225-252 https://doi.org/10.1057/9781137025098_10
Niklewski, Jacek ; Rodgers, Timothy. / International Portfolio Diversification and the 2007 Financial Crisis. Advances in Financial Risk Management: Corporates, Intermediaries and Portfolios. editor / Jonathan A. Batten ; Peter MacKay ; Niklas Wagner. Basingstoke : Palgrave Macmillan UK, 2013. pp. 225-252
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