0 avis
Country ETFs, currencies and international diversification
in Journal of Asset Management, 15
Voir la revue «Journal of Asset Management»
Empirical evidence shows that market prices of country exchange traded funds (ETFs) react in unison with domestic stocks on their listing exchange to a common set of risk factors. This would argue against the use of indirect foreign investments via country ETFs to diversify a portfolio of domestic stocks. Using the net asset values of a cross-section of US and European-listed ETFs to control for market noise and time zone discrepancies, this study seeks to quantify the diversification benefits
...
of country ETFs for a domestic investor. Moreover, fund returns are decomposed into their two fundamental drivers – the variations of the underlying foreign stocks and the foreign currency – in order to investigate the role of currency returns in modifying correlations between country funds and domestic stocks. To conclude, the analysis is repeated for the pre- and post-financial crisis periods to gain insight into shifts in the relationships between world equity markets since this dislocation.
Lire la suite