Dr Mehmet Umutlu M.Umutlu@napier.ac.uk
Associate Professor
Market segmentation and international diversification across country and industry portfolios
Umutlu, Mehmet; Yargı, Seher Gören; Zaremba, Adam
Authors
Seher Gören Yargı
Adam Zaremba
Abstract
We conjecture that partially segmented stock indexes that are characterized by low correlation with the world market are mainly priced by local factors and should produce abnormal returns relative to a global asset-pricing model. This implies a negative relation between correlation and future index returns in the presence of segmented indexes. Empirical evidence confirms such a relationship for the sample of industry indexes, suggesting a heterogeneous segmentation. However, we do not observe a similar pattern for country indexes. In addition, the international diversification potential of industries does not vanish during volatile periods. The hypothesis that the negative relationship should be stronger for the more segmented subsamples that are characterized by small market size and emerging country origin is verified for the industry sample. Thus, cross-industry diversification is superior to mere cross-country diversification.
Citation
Umutlu, M., Yargı, S. G., & Zaremba, A. (2023). Market segmentation and international diversification across country and industry portfolios. Research in International Business and Finance, 65, Article 101954. https://doi.org/10.1016/j.ribaf.2023.101954
Journal Article Type | Article |
---|---|
Acceptance Date | Mar 30, 2023 |
Online Publication Date | Apr 13, 2023 |
Publication Date | 2023-04 |
Deposit Date | May 12, 2023 |
Publicly Available Date | Oct 14, 2024 |
Journal | Research in International Business and Finance |
Print ISSN | 0275-5319 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 65 |
Article Number | 101954 |
DOI | https://doi.org/10.1016/j.ribaf.2023.101954 |
Keywords | International portfolio diversification; Industry diversification; Country diversification; Partial segmentation and integration; Index return correlations |
Files
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Contact repository@napier.ac.uk to request a copy for personal use.
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