Faculty Scholarship 1994 - Present

Returns and Co-Movements of Domestic and Country Index Funds: Global Portfolio Diversification Implications

Exchange-traded country index funds have become a popular investment vehicle for U.S. investors. In this paper, we study the global portfolio diversification benefits of 24 iShares country index funds. Our findings indicate that the Brazilian (EWZ), Austrian (EWO), Australian (EWA), and Malaysian (EWM) index funds provide the best global portfolio diversification benefit to U.S. investors. We use Principal Components Analysis (PCA) to study which country funds would be best to include in a global portfolio for an efficient diversification.