International diversification

The weighting is the hardest part

Charles B. Braymen, Robert R. Johnson

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Many traditional, international diversification approaches do not address the influence of economic integration and corresponding market correlations across countries. The authors develop a trade-adjusted weighting methodology that reduces the effect of economic integration on portfolio performance. Results demonstrate that the trade-adjusted portfolio outperforms a GDP-weighted portfolio in terms of risk-adjusted returns. Likewise, the trade-adjusted portfolio's performance exceeds that of an equally weighted portfolio in most risk-adjusted measures. These results provide a strong argument for investment managers to use trade-adjusted weightings in forming portfolios and developing financial products.

Original languageEnglish
Pages (from-to)53-62
Number of pages10
JournalJournal of Portfolio Management
Volume42
Issue number1
DOIs
StatePublished - Sep 1 2015

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International diversification
Weighting
Economic integration
Portfolio performance
Financial products
Risk-adjusted returns
Methodology
Managers

All Science Journal Classification (ASJC) codes

  • Finance
  • Accounting
  • Economics and Econometrics
  • Business, Management and Accounting(all)

Cite this

International diversification : The weighting is the hardest part. / Braymen, Charles B.; Johnson, Robert R.

In: Journal of Portfolio Management, Vol. 42, No. 1, 01.09.2015, p. 53-62.

Research output: Contribution to journalArticle

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