International diversification

International diversification

The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns.

International Diversification

Investment of one's portfolio in securities that are traded in various countries. This is done to reduce risk, often political risk. For example, if one country's government announces a larger than normal budget deficit, or the central bank raises interest rates, this may affect security prices in one country, but not necessarily in other countries that did not take equivalent steps. Likewise, if a whole industry fails in one country but thrives in another, investing in the same industry in both countries hedges one's risk. Some analysts argue that international diversification is less effective in an era of globalization, but other analysts dispute that.
References in periodicals archive ?
The preceding discussion suggests that international diversification is associated with unique dimensions of forecasting difficulty that are incremental to the proxies used in prior studies.
This study investigates the impact of various top management team characteristics on firm international diversification.
Their perception is that all international stocks possess the same risk/reward characteristics, a misconception that prevents them from exploring international diversification.
The gains that result from the international diversification of financial market risk are well known.
In this environment, many investors are asking why they can't get effective international diversification by buying the stocks of American companies that do a lot of business overseas.
The results show that investors can get a lot of the benefits of international diversification by simply buying U.
ADRs simplify international diversification of portfolios, which can enhance yields and improve risk-adjusted returns.
To impose a ceiling on insurer ratings based on the sovereign debt rating is inappropriate as it ignores meaningful risk management activity at the company level and international diversification.
ABK, with still limited international diversification, might be impacted more than others, although the new Egyptian operation offers more scope for growth, albeit in a higher risk market.
In its assessment, S&P emphasises the regulatory stability provided by the new gas sector reform, the prudent management of the company's international diversification and its regulated business, which offers high predictability and stability for EnagEis' revenues.
Most SWFs adopt a very conservative investment approach that focuses on international diversification by region and by asset class
Abstract We examine the role of ownership structure on international diversification during institutional transition.

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