Portfolio Diversification: International Perspective

- Dr. Narayan Baser, Associate Professor, Shri Jairambhai Patel Institute of Business Management & Computer Applications, (Formerly NICM), Gandhinagar, Gujarat, India

Abstract:

The recent increase in inflow of international portfolio investments is the true reflection of the globalized financial markets with more liberalized and deregulated capital and foreign exchange movements. Investors become more conscious and alert about the potential gains from their better risk return profile with international investments. Portfolio management and asset selection is one of the critical decision areas in the financial world. Modern portfolio theory accepted that diversification can reduce the portfolio’s risk by holding less positively correlated assets. International stocks are expected to offer investors with greater diversification benefits since their prices are often less correlated and determined by different fundamental economic and industry factors. This article tries to provide a review of various researchers’ contribution in International diversification and its potential benefits along with barriers.

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