RT Journal Article
SR Electronic
T1 International Small Cap: Defining
a Promising Asset Class
JF The Journal of Investing
FD Institutional Investor Journals
SP 22
OP 40
DO 10.3905/joi.2013.22.1.022
VO 22
IS 1
A1 Mathew Lystra
YR 2013
UL https://pm-research.com/content/22/1/22.abstract
AB The benefits of international equity portfolio diversification have been well documented. Until recently, however, most investors worldwide have concentrated exclusively on large cap names from developed countries (Ferreira and Matos [2006]; Kang and Stulz [1997]). This focus on large, often multinational companies with strong brand recognition benefited investors as they began to reduce the home-country bias within their portfolios. Unfortunately, as often happens when a market, sector, or individual company becomes widely followed, the prospective benefits to be gained–risk reduction, greater return potential, or both–have declined. Macro global factors common to developed large cap companies now explain much of their performance, while increased analyst coverage and more transparent reporting have reduced information inefficiencies (Yan [2009]). All of this has led to more highly correlated performance and lessened the magnitude of the potential benefits that investors were seeking by diversifying their portfolios away from a single country or region.TOPICS: Equity portfolio management, global