International equity diversification and shortfall risk
DOI:
https://doi.org/10.1016/S1057-0810(99)00031-1Keywords:
Asian options, Asset allocation, Shortfall risk, International diversificationAbstract
International equity diversification benefits Canadian investors very substantially by reducing shortfall risk, as shown by results of a model that minimizes the risk of shortfall from a desired consumption level for a retired investor with an unknown date of death and stochastic investment returns. It does not benefit American investors materially. The United States equity market is a large proportion of the international equity market that is available to individual investors, and United States returns are highly correlated with other markets. © 1999 Elsevier Science Inc. All rights reserved.
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