Sources of Gains from International Portfolio Diversification

42 Pages Posted: 15 Jun 2004

See all articles by José Manuel Campa

José Manuel Campa

University of Navarra - Madrid Campus - IESE Business School; National Bureau of Economic Research (NBER)

Nuno Fernandes

University of Navarra, IESE Business School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2004

Abstract

This Paper looks at the determinants of country- and industry-specific factors in international portfolio returns using a sample of 36 countries and 39 industries over the last three decades. Country factors have remained relatively stable over the sample period while industry factors have significantly increased during the last decade. The importance of industry and country factors is correlated with measures of international economic and financial integration and development. Country factors are smaller for countries integrated in world financial markets and have declined as the degree of financial integration and the number of countries pursuing financial liberalizations has increased. Higher international financial integration within an industry increases the importance of industry factors in explaining returns. Economic integration of production also helps in explaining returns. Countries with a more specialized production activity have higher country factors.

Keywords: Financial integration, portfolio investment, emerging markets

JEL Classification: F32, G31

Suggested Citation

Campa, José Manuel and Fernandes, Nuno, Sources of Gains from International Portfolio Diversification (May 2004). Available at SSRN: https://ssrn.com/abstract=556742

José Manuel Campa (Contact Author)

University of Navarra - Madrid Campus - IESE Business School ( email )

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Nuno Fernandes

University of Navarra, IESE Business School ( email )

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European Corporate Governance Institute (ECGI) ( email )

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