Navigation path

Time-varying integration, the euro and international diversification strategy - Lieven Baele and Koen Inghelbrech

Lieven Baele, Tilburg University, CentER, and Netspar; Koen Inghelbrecht, Ghent University

Time-varying integration, the euro and international diversification strategy - Lieven Baele and Koen Inghelbrechpdf(2 MB) Choose translations of the previous link 

This paper investigates the impact of globalization and integration on the relative benefits of country and industry diversification.
Unlike previous models, our factor model allows asset exposures to vary with both structural changes and temporary fluctuations in the economic and financial environment.
First, we find that globalization and integration have lead to a gradual convergence of country to industry betas, especially in Europe.
Second, not accounting for time-varying factor exposures leads to substantial biases in measures of country and industry risk.
Third, even though the edge has structurally decreased, geographical diversification continues being superior to industry diversification.

JEL classification: G11, G12, G15, C32, F37
doi:10.2765/84106
(European Economy. Economic Papers. 333. July 2008. Brussels. 58pp. Tab. Graph. Ann. Bibliogr. )

KC-AI-08-333-EN (online)
ISBN 978-92-79-08258-0 (online)
ISSN 1735-3187

Additional tools

  • Print version 
  • Decrease text 
  • Increase text