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 (US) |
|---|---|
| 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 |
All Science Journal Classification (ASJC) codes
- Accounting
- Business, Management and Accounting(all)
- Finance
- Economics and Econometrics
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Braymen, C., & Johnson, R. R. (2015). International diversification: The weighting is the hardest part. Journal of Portfolio Management, 42(1), 53-62. https://doi.org/10.3905/jpm.2015.42.1.053