Book Synopsis International Diversification in Bond Portfolios - A Historical Performance Analysis by :
Download or read book International Diversification in Bond Portfolios - A Historical Performance Analysis written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study touches upon the phenomenon of investors deliberately over weighting the proportion of their assets invested in their home country, called home-bias. While researchers have focused on the reasons for this decision, only a few papers focus on the actual diversification benefits that these investors would get in the case of a full diversification of their investments. Furthermore, some researchers lead to think that the recent developments of the world economy and the ongoing globalization could impact the size of these benefits. As a matter of fact, a time trend analysis on the development of home-bias costs in equity portfolios could already highlight a negative trend over the last two decades. This study focuses on corporate bond portfolios as these instruments won in relevance for companies seeking alternative financing means. This study made use of a rather recent optimization procedure based on the Conditional Value-at-Risk (also called Expected Shortfall) that can cope with instruments showing non-normal returns in contrast to other more standard procedures like the mean-variance framework or optimization based on the Value-at-Risk. The results showed that home-bias costs did not decrease over the last decade for biased investors coming from all over the world. Also, the size of the diversification benefits that investors are ignoring through their home-bias seems not to be region and country specific or related to their development level.
