Using country index returns from 8 developed countries and 8 emerging market countries, we re-explore the benefits to international diversification over the past 30 years. To examine various theories in a comparable way, we intentionally limited ourselves to an examination of country index returns and a limited number of types of investments. While it is often difficult to find statistically significant improvements in mean returns, the Sharpe ratios from international diversified investments, especially those hedged against currency depreciation, appear to be quite better than the returns investors can obtrain from investing strictly in their local country index.
Hodrick, Robert, and Xiaoyan Zhang. "International Diversification Revisited." Columbia Business School, 2014.
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