RT Journal Article SR Electronic T1 Diversification Benefits of European Small-Cap Stocks after the Global Financial Crisis and Brexit JF The Journal of Investing FD Institutional Investor Journals SP 95 OP 118 DO 10.3905/joi.2019.1.107 VO 29 IS 1 A1 Tien D. Nguyen A1 Lorne N. Switzer YR 2019 UL https://pm-research.com/content/29/1/95.abstract AB In this article, we investigate the diversification gains obtained from investing in European small-cap stocks, focusing on the periods since the Global Financial Crisis and Brexit. We find mixed evidence to support the assertion that European small-caps provide diversification benefits to a benchmark portfolio of large US stocks. The benefits are also limited when benchmark assets include both a US large-cap portfolio as well as a portfolio of European large-cap stocks. After Brexit, US investors achieve diversification benefits from investments in European large-cap stocks. However, after Brexit, small-cap stocks from only one country in the European Union are shown to offer additional diversification gains.TOPICS: Financial crises and financial market history, portfolio theory, portfolio constructionKey Findings• In the aftermath of the Global Financial Crisis, from a US investor’s perspective, the benefits of investing in European small-caps have declined.• Since the UK vote affirming Brexit, with the exception of one country, European small-caps have become even less attractive for US investors.• Brexit has not nullified diversification benefits for large-cap European stocks with significant international exposure.