BENEFITS FROM INTERNATIONAL DIVERSIFICATION: INDIAN EXPERIENCES

Ray Hirak, Roy Tamojit, Roy Malay Kanti

Abstract


Investing beyond border reduces risk compared to traditional domestic investment; this assertion is well founded by numerous researches in financial economics. The benefit virtually emerges from two sources. Increase
in the number of investible countries that widen scope of international diversification and less than perfect correlation among world markets that essentially helps in risk reduction. Thus “widening scope” and nature of co
movement among markets are the two main sources of benefit from international diversification. The study, however suggests that due to various restrictions coupled with “home bias”, international investors still rely on
domestic market that suggests diversification inefficiency

Keywords


Portfolio investment, International financial markets, Diversification, Risk reduction, Co variance

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