The international diversification fallacy of exchange-listed securities |
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| Affiliation: | 1. Sr. Research Associate, Bank of America, 121 West Trade Street, 11th Floor, Charlotte, NC 28255,USA; Phone: (704) 388-1007; Fax: (704) 386-9982;;1. Leicester Castle Business School, De Montfort University, Leicester LE1 9BH, United Kingdom;2. School of Business and Economics, Loughborough University, Loughborough, LE11 3TU, United Kingdom;1. Department of Social Science and Economics, Sapienza University of Rome, Italy;2. Department of Economics and Social Science, American University of Rome “John Cabot”, Italy;3. Development Research Group, World Bank, United States;4. School of Foreign Service, Georgetown University, United States;5. Department of Economics and Gerald R. Ford School of Public Policy, University of Michigan, United States;1. Saarland University, Chair for Quantitative Methods and Statistics, Faculty of Economics, 66123 Saarbrüucken, Germany;2. University of Regensburg, Chair for Statistics and Risk Management, Faculty of Economics, 93040 Regensburg, Germany |
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| Abstract: | This paper reviews various investment vehicles and examines their international diversification potential. The primary focus is on the ability of U.S. exchange-listed investments such as closed-end country funds, American depository receipts (ADRs), and multinational corporations (MNCs) to provide a diversification effect similar to direct investment in foreign equity. The results show that the U.S. exchange-listed securities included in this study behave more like the host exchange than their home exchange. This result suggests that these U.S. exchange-listed securities, on average, do not perform an international diversification role for U.S. investors. |
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