DP3086 Portfolio Diversification: Alive and Well in Euroland!

Author(s): Kpate Adjaoute , Jean-Pierre Danthine

Publication Date: November 2001

Keyword(s): portfolio diversification , return dispersion , euro

JEL(s): F30 , G11 , G15

Programme Areas: Financial Economics , International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP3086.asp

Diversification opportunities in Euroland appear to have improved significantly since the advent of the euro, thus invalidating the prospects identified in the last years of the convergence-to-EMU period. We identify low frequency movements in the time series of return dispersions suggestive of cycles and long swings in return correlations. The most recent post-euro period is clearly associated with an important upswing with return dispersions exceeding for the first time their peaks of the early nineties.