Exploring the diversification benefits of US international equity closed-end funds

Fletcher, Jonathan (2021) Exploring the diversification benefits of US international equity closed-end funds. Financial Markets and Portfolio Management, 36 (3). pp. 297-320. ISSN 1555-4961 (https://doi.org/10.1007/s11408-021-00397-1)

[thumbnail of Fletcher-FMPM-2021-Exploring-the-diversification-benefits-of-US-international-equity]
Text. Filename: Fletcher_FMPM_2021_Exploring_the_diversification_benefits_of_US_international_equity.pdf
Final Published Version
License: Creative Commons Attribution 4.0 logo

Download (731kB)| Preview


I use the simulation approach of Jobson and Korkie (J Portfolio Manag 7:70–74, 1981), combined with Michaud optimization (Michaud and Michaud, Efficient asset management: a practical guide to stock portfolio optimization and asset allocation, Oxford University Press, Oxford, 2008), to evaluate whether US international equity closed-end funds (CEF) provide out-of-sample diversification benefits. My study finds that international CEF do not provide diversification benefits across the whole sample period. However, the out-of-sample diversification benefits of international CEF do vary across economic states. I find that there are significant diversification benefits when the lagged one-month US Treasury Bill return is lower than normal, and when higher than normal, regardless of the benchmark investment universe used.


Fletcher, Jonathan ORCID logoORCID: https://orcid.org/0000-0003-0568-9145;