Flavin, Thomas (2004) The effect of the Euro on country versus industry portfolio diversification. Journal of International Money and Finance, 23. pp. 1137-1158. ISSN 0261-5606

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Abstract

We examine the relative benefits of industrial versus geographical diversification in the Euro zone before and after the introduction of the common currency. A priori, one may expect that increased stock market correlation would precipitate a move from geographical towards industrial diversification. We employ the empirical model of Heston and Rouwenhorst but show that adopting a panel data approach is a more efficient estimation method. We find evidence of a shift in factor importance; from country to industry. However, this is not exclusive to the Euro zone but is also present for non-EMU European countries. Therefore, fund managers should pursue industrial rather than geographical diversification strategies.

Item Type:	Article
Keywords:	Portfolio diversification; Industry and country effects; Euro;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	7999
Identification Number:	https://doi.org/10.1016/j.jimonfin.2004.08.004
Depositing User:	Thomas Flavin
Date Deposited:	07 Mar 2017 15:57
Journal or Publication Title:	Journal of International Money and Finance
Publisher:	Elsevier
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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