Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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 country diversification is less effective in an era of globalization, but other analysts dispute that.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved