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Cloutier, Richard
- Is International Investment Diversification Prudent for the Individual or Corporate Investor?
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1 Swiss Management Center University-Transknowlogy Campus, SZ
1 Swiss Management Center University-Transknowlogy Campus, SZ
Source
International Journal of Financial Management, Vol 8, No 2 (2018), Pagination: 26-31Abstract
This paper examines the benefits of international diversification for the individual and corporate investor and attempts to determine whether international diversification is prudent. Although research supports as well as refutes the claim that international diversification improves performance, results vary due to the non-static nature of national markets’ returns, standard deviations, and correlations. As a result, data for the research are dependent on the period of study. As global markets have become more synchronized and US equities have had an unusual increase in value recently, studies relying on newer data argue against the benefits. However, because domestic investing limits diversification potential, international diversification is prudent for long-term investors.Keywords
International, Diversification, Prudent, Investors, Corporate Investors.
References
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- Using VIX to Dynamically Hedge Portfolio Risk
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Authors
Affiliations
1 Washington Trust Bank
1 Washington Trust Bank
Source
International Journal of Financial Management, Vol 8, No 3 (2018), Pagination: 15-22Abstract
Many investors accept “buy and hold” as their long-term investment strategy. However, during periods of heightened risk, staying disciplined can be problematic. Alternatively, market timing appeals to our emotions but is very difficult to employ successfully. Between these two extremes lies tactical asset allocation, where limited variances are allowed to take advantage of market conditions. Dynamic hedging is a form of tactical asset allocation. Instead of relying on future predictions of asset class returns, dynamic hedging strives to reduce portfolio risk when market risk is elevated. This paper presents a dynamic hedging strategy developed to accomplish this goal. It uses VIX’s normal trading range to assess market risk. When VIX trades above its normal trading range and the upper Bollinger band, the dynamic hedging strategy is applied. The result is that portfolio risk is lowered when market risk is extreme. The application of this strategy provides better returns, lower volatility, and better downside protection than a strategic “buy and hold” allocation. It also avoids the deployment problems associated with market timing strategies.Keywords
VIX, Dynamic Hedging, Tactical Asset Allocation.References
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