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| Is diversifying across world markets a good investment strategy? (07/1999) |
the federal reserve bank of san francisco publications | student activities | teacher resources | contacts ask dr. econ an analyst recently indicated that "putting all your eggs in one basket" isn'tlinked. furthermore, if the recovery in asia is dependent on strong u.s. demand for asian products, how can the portfolio of an international investor be diversified? (07/1999) there is a body of this follows because: the standard deviation of returns from a single stock in a portfolio is much larger than the standard deviation of the entire portfolio. the standard deviation of returns on aidual stock or a portfolio of stocks from a single industry may not closely follow the overall market. in a similar manner, worldwide diversification, adding some international stocks to theng their investments across multiple markets. as your question notes, there are some linkages between real economic conditions and stock market performance across countries. however, the performanceinternational diversification. note: the standard deviation of portfolio return may be broken down into two components. the first component, unsystematic risk, may be eliminated throughiminate the unsystematic risk from a portfolio. references fabozzi, frank j., franco modigliani, michael g. ferri. 1994. foundations of financial markets and institutions. englewood cliffs, nj:
http://www.frbsf.org/education/activities/drecon/1999/9907.html - 6k
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http://www.frbsf.org/education/activities/drecon/1999/9907.html
2005-12-04 11:40:30
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