Faculty Scholarship 1994 - Present

Portfolio Diversification with IShares Country Index Funds

In this paper, we use a novel application of the Capital Assets Pricing Model (CAPM) with country betas to determine if U.S. investors would benefit by adding iShares exchange-traded country index funds into their portfolios. Our findings indicate that U.S. investors would benefit by including any of the 21 iShares country index funds studied in the paper in their portfolios. We also use the Markowitz mean-variance portfolio optimization approach to determine which iShares country index funds can make the greatest contribution to global portfolios. We find that U.S. investors could increase the portfolio return per unit of volatility risk by increasing the foreign investment component in their global portfolios.