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    The effect of the Euro on country versus industry portfolio diversification

    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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    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:
    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
    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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