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Asian Review of Financial Research, Vol., No..
pp.280~307
pp.280~307
An Examination of International Portfolio Diversification Benefits for Korean Investors
ByoungKyu Min Graduate School of Finance, Korea Advanced Institute of Science and Technology
TongSuk Kim Graduate School of Finance, Korea Advanced Institute of Science and Technology
We employ mean-variance spanning and intersection tests in the stochastic discount factor approach to examine the potential diversification benefits of international investments from the perspective of Korean investors. Our results show that the addition of international regional indices to the set of domestic equities provides significant diversification benefits. However, the source and economic magnitude of diversification benefits differ across international markets. Furthermore, we find that when investors manage their portfolio based on instrument variables, they can not only expand their investment opportunities by investing in international assets, but also increase the efficiency gain of diversification benefits.
ByoungKyu Min
TongSuk Kim
We employ mean-variance spanning and intersection tests in the stochastic discount factor approach to examine the potential diversification benefits of international investments from the perspective of Korean investors. Our results show that the addition of international regional indices to the set of domestic equities provides significant diversification benefits. However, the source and economic magnitude of diversification benefits differ across international markets. Furthermore, we find that when investors manage their portfolio based on instrument variables, they can not only expand their investment opportunities by investing in international assets, but also increase the efficiency gain of diversification benefits.
Diversification benefits,Spanning and intersection tests,Stochastic discount factor approach