Country Risk and International Portfolio Diversification for the Individual Investor
DOI:
https://doi.org/10.61190/fsr.v12i1.4755Keywords:
Portfolio effects, IMF, Hedging, Country risk, International diversificationAbstract
The international financial markets have not been sufficiently incorporated in the typical portfolio of an American investor, regardless of whether the portfolio is directly or indirectly managed. This paper provides reasons for looking at the international financial markets as an essential ingredient in developing a portfolio strategy, examines the risk/return profile of international portfolios, offers a model for incorporating country risk in the allocation of individual investment funds across financial markets in the world, and shows a list of options in transforming domestic into international portfolios and for hedging their risk.
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