Essays In International Portfolio Diversification

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Three Essays In International Portfolio Diversification

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Author : Amir Andrew Amadi
language : en
Publisher:
Release Date : 2004

Three Essays In International Portfolio Diversification written by Amir Andrew Amadi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.

Essays In International Portfolio Diversification

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Author : Hansoo Kim
language : en
Publisher:
Release Date : 2004

Essays In International Portfolio Diversification written by Hansoo Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.

Essays On International Portfolio Diversification And Asset Prices

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Author : Jun Sato
language : en
Publisher:
Release Date : 1999

Essays On International Portfolio Diversification And Asset Prices written by Jun Sato and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Asset allocation categories.

Essays In International Finance

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Author : Oussama M'saddek
language : en
Publisher:
Release Date : 2018

Essays In International Finance written by Oussama M'saddek and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

This thesis consists of an introductory chapter and three empirical studies that contribute to the international finance literature by investigating the dynamics of cojumps between major equity markets and assessing their impact on international portfolio allocation and asset pricing. The first study aims to examine the impact of cojumps between international stock markets on asset holdings and portfolio diversification benefits. Using intraday index-based data for exchange-traded funds (SPY, EFA and EEM) as proxies for international equity markets, we document evidence of significant intraday cojumps, with the intensity increasing during the global financial crisis of 2008-2009. The application of the Hawkes process also shows that jumps propagate from the US and other developed markets to emerging markets. However, the evidence of jump spillover from emerging markets to developed markets is weak. To assess the impact of cojumps on international asset holdings, we consider a representative American investor who allocates his wealth among one domestic risky asset, the SPY fund, and two foreign risky assets, the EFA and EEM funds and compute the optimal portfolio composition from the US investor perspective by minimizing the portfolio's risk. We find that the demand of foreign assets is negatively correlated to jump correlation, implying that a domestic investor will invest less in foreign markets when the frequency of cojumps between domestic and foreign assets increases. In contrast, idiosyncratic jumps are found to increase the diversification benefits and foreign asset holdings in international equity portfolios.The second study tackles the issue of pricing of both continuous and jump risks in the cross-section of international stock returns. We contribute to the literature on international asset pricing by considering a general pricing framework involving six separate market risk factors. We first decompose the systematic market risk into intraday and overnight components. The intraday market risk includes both continuous and jump parts. We then consider the asymmetry and size effects of market jumps by separating the systematic jump risk into positive vs. negative and small vs. large components. Using the intraday data of a set of country exchange traded funds covering developed, emerging and frontier markets, we show that continuous and downside discontinuous risks are positively rewarded in the cross-section of expected stock returns during the pre-financial crisis period whereas the upside and large jump risks are negatively priced during the crisis and post-crisis periods.The third study examines how international equity markets respond to aggregate market jumps at price and volatility levels. Using intraday data of ten exchange-traded funds covering major developed and emerging markets and two international market volatility indices (VIX and VXEEM), we show that both price and volatility jump betas are time-varying and exhibit asymmetric effects across upside and downside market movements. Looking at the relation between future stock market returns and aggregate market price and volatility jumps, we measure the proportion of future excess returns explained by market price and volatility jumps and provide evidence of a significant predictive power that market price and volatility jumps have on future stock returns.

Essays On Portfolio Choice And Risk Management

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Author : Yi-Chin Hsin
language : en
Publisher:
Release Date : 2016

Essays On Portfolio Choice And Risk Management written by Yi-Chin Hsin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.

Globalization increases the access to financial markets and provides expanding opportunities for investors to diversify internationally. As suggested by the Modern Portfolio Theory (Markowiz, 1952), rational investors should use one of the following two strategies to achieve portfolio diversification: (1) Investing in asset classes thought to have low correlations or (2) increasing the sizes of their portfolios in multiple markets. In the early 1970s, diversification was referred to as the “free lunch” in investment. However, French and Poterba (1991) show that investors still tend to hold a disproportionate part of domestic equities in their portfolios. This phenomenon is called “the equity home bias,” which is still puzzling in the international finance literature. These essays investigate what drives individuals to hold inefficient portfolios and forgo the benefits of international diversification. The first chapter of this study explains the equity home bias among international portfolios by analyzing the relationship between the sizes of portfolio required and the investor’s perception about risk. A flexible three-parameter distribution developed by Hueng and Yau (2006) to model the measures of risk for stock returns is extended here. Conclusions reveal that there is a trade-off between the desirable reduction of variance and the undesirable increase of negative skewness of diversifying international portfolios. This trade-off relationship may give an explanation to the equity home bias phenomenon in reality. The second chapter further examines the same question from the correlation perspective. Through numerical analysis, this chapter presents the evolution of U.S. equity home bias in the context of dynamic correlations between developed and emerging markets. The results imply that the persistent high correlations between the developed European and North American markets induced a high U.S. home bias; while on the other hand, the developed Pacific Asian and emerging markets have been relatively less correlated with that of the North American market and has led to a lower U.S. home bias. As future correlations are steadily increasing, investors may seek newly open markets for diversification benefits in the present. Yet over the long run, the benefits of international diversification can be very few. The home bias in the future will be rationalized by the equilibrium correlations between international markets. The third chapter uses micro data to analyze the portfolio choices in risky assets over the working-age of the single individual and the retired segments that are exposed to health and medical expense risk. Single retirees respond to changes in medical expenses by altering their portfolio toward risky assets, while no evidence is found in the changes of single working people’s portfolios. This result is in contrast to theoretical prediction, which assumes that the elders tend to hold riskless assets.

Portfolio Diversification And Currency Inconvertibility

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Author : Jorge Braga de Macedo
language : en
Publisher:
Release Date : 1979

Portfolio Diversification And Currency Inconvertibility written by Jorge Braga de Macedo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1979 with Foreign exchange categories.

Essays On International Comovements Of Financial Markets

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Author : Yusuke Tateno
language : en
Publisher:
Release Date : 2011

Essays On International Comovements Of Financial Markets written by Yusuke Tateno and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.

International portfolio diversification is beneficial only if asset returns are not significantly correlated across countries. Therefore, it is essential for investors who want to make an appropriate portfolio selection to understand the nature of asset return correlations. This thesis consists of three essays on international comovements of financial markets. The first essay analyzes the effects of heterogeneous beliefs and learning on international comovements of equity returns and portfolio rebalancing mechanism. This essay develops a continuous-time general equilibrium model in a two-asset and two-good economy with two representative agents, who differ in perceived rates of output growth and accuracy of beliefs. The equilibrium correlations of equity returns across counties and optimal portfolios are expressed in terms of the differences in beliefs. The main findings are: (1) the differences in perceived rates of output growth generate equity home or foreign bias, resulting in lower crosscountry equity return correlations; and (2) the volatilities of optimal portfolios and capital flows increase with the differences in perceived output growth and with the differences in accuracy of beliefs. The second essay studies the effects of trade costs in goods market on international comovements of equity markets and those on equity home bias. This essay develops a continuous-time general equilibrium model in a two-country, two-asset, and two-good setting where international trade of goods is costly. I solve for the optimal portfolios and the equilibrium correlations of cross-country equity returns and analyze how they change depending on the size of trade costs, the coeiffcient of risk aversion, and the elasticity of substitution between domestic and foreign goods. It is found that the cross-country equity return correlations decrease with the size of trade costs. This result is robust to different sizes of trade costs and asymmetry related to potential growth and consumer preferences. It is also found that the size of the trade costs and other parameter values determine whether trade costs would generate equity home bias or foreign bias. The third essay is devoted to an empirical analysis of the effects of financial integration on international comovements of financial markets. The essay provides a characterization of synchronization among 24 countries over the period 1980-2003. A country-pair panel instrumental variables framework is employed to explain time-varying bilateral correlations among national stock returns, by utilizing the dataset on trade costs in Fitzgerald (2008). It is found that finnancial integration driven by reduction of trade costs leads to a higher degree of synchromization across stock markets.

Three Essays On International Diversification Of Firms In An Emerging Economy

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Author : Heechun Kim
language : en
Publisher:
Release Date : 2008

Three Essays On International Diversification Of Firms In An Emerging Economy written by Heechun Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Diversification in industry categories.

Essays On International Capital Flows And Benchmarked Investors

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Author : Tomás Williams
language : ca
Publisher:
Release Date : 2017

Essays On International Capital Flows And Benchmarked Investors written by Tomás Williams and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

This thesis provides an empirical investigation of international capital flows and how they affect financial markets and economic activity, with a focus on capital flows from benchmarked investors. In the first chapter, I study different channels through which well-known benchmark indexes impact financial markets across countries. Exogenous, changes in benchmarks affect the asset allocation by international mutual funds, and by doing so they impact capital flows, asset prices and exchange rates. In the second chapter, I show that government access to foreign credit increases private access to credit. I use a natural experiment that increased the capital inflows by benchmarked investors to Colombia's sovereign debt market. Results show that after this event, commercial banks in Colombia reduced their exposure to government debt, and increased credit to the private sector, suggesting positive effects on the real economy. In the third chapter, I argue that because of the way financial globalization is often measured, it has led to the misperception that financial globalization in emerging markets has been growing in recent years. Using alternative measures I find that, financial globalization has grown only marginally and international portfolio diversification has been limited.

Empirical Essays On Portfolio Diversification

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Author : Dennis Dlugosch
language : en
Publisher:
Release Date : 2014

Empirical Essays On Portfolio Diversification written by Dennis Dlugosch and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.