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 language | English |
|---|---|
| Pages (from-to) | 53-62 |
| Number of pages | 10 |
| Journal | Journal of Portfolio Management |
| Volume | 42 |
| Issue number | 1 |
| DOIs | |
| State | Published - Sep 1 2015 |
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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 journal › Article
}
TY - JOUR
T1 - International diversification
T2 - The weighting is the hardest part
AU - Braymen, Charles B.
AU - Johnson, Robert R.
PY - 2015/9/1
Y1 - 2015/9/1
N2 - 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.
AB - 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.
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UR - http://www.scopus.com/inward/citedby.url?scp=84974687837&partnerID=8YFLogxK
U2 - 10.3905/jpm.2015.42.1.053
DO - 10.3905/jpm.2015.42.1.053
M3 - Article
VL - 42
SP - 53
EP - 62
JO - Journal of Portfolio Management
JF - Journal of Portfolio Management
SN - 0095-4918
IS - 1
ER -