The benefits from international diversification for Nordic investors

Eva Liljeblom, Anders Löflund, Svante Krokfors

Research output: Contribution to journalArticleScientificpeer-review

12 Citations (Scopus)

Abstract

In this paper, we investigate the magnitude of the benefits from international diversification from the Nordic point of view. Special attention is paid to whether potentially increased co-movement of stock markets together with more volatile Nordic currencies have resulted in decreased benefits from international diversification towards the end of the 1980s. Moreover, the paper presents evidence on the benefits from international diversification for a currency which has recently started its free float, the Finnish markka (FIM). We find significant increases in stock market co-movement. Both unhedged ex ante strategies as well as strategies hedged for exchange rate risk are investigated, revealing substantial benefits from international diversification for the Nordic countries. However, we obtain mixed results concerning the question of the optimality of hedging.
Original languageEnglish
Peer-reviewed scientific journalJournal of Banking & Finance
Volume21
Issue number4
Pages (from-to)469-490
Number of pages22
ISSN0378-4266
DOIs
Publication statusPublished - 1997
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • international diversificaton
  • stock market co-movement

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