Peer-Reviewed Journal Details
Mandatory Fields
Flavin, TJ
2004
November
Journal of International Money and Finance
The effect of the Euro on country versus industry portfolio diversification
Published
38 ()
Optional Fields
INTERNATIONAL DIVERSIFICATION MARKET INTEGRATION STOCK RETURNS ASSET ALLOCATION DUMMY VARIABLES VOLATILITY TIME RISK EXPLAIN REGIME
23
1137
1158
We examine the relative benefits of industrial versus geographical diversification in the Euro zone before and after the introduction of the common currency. A priori, one may expect that increased stock market correlation would precipitate a move from geographical towards industrial diversification. We employ the empirical model of Heston and Rouwenhorst but show that adopting a panel data approach is a more efficient estimation method. We find evidence of a shift in factor importance; from country to industry. However, this is not exclusive to the Euro zone but is also present for non-EMU European countries. Therefore, fund managers should pursue industrial rather than geographical diversification strategies. (C) 2004 Elsevier Ltd. All rights reserved.
OXFORD
0261-5606
10.1016/j.jimonfin.2004.08.004
Grant Details