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Test for Theory of Portfolio Diversification
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 Title & Authors
Test for Theory of Portfolio Diversification
Kim, Tae-Ho; Won, Youn-Jo;
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This study investigates the dynamic structure of interdependence on the domestic and related major stock markets by employing a statistical framework. Finance theory predicts potential gains by international portfolio diversification if returns from investment in different national stock markets are not perfectly correlated or not cointegrated. The benefit of international diversification is limited when national stock markets are cointegrated because of the limited amount of independent variation by the presence of common factors. The statistical tests suggest that international diversification appears to be favorable after the period of the comovement of the stock prices caused by 1997 Asian financial crisis. The result reflects the increase in overseas investment and purchase of overseas funds after the early 2000`s.
Diversification;common stochastic trend;forecasting error;
 Cited by
경기 침체기 시장의 공통확률추세 검정,조중재;이승은;김태호;

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