Abstract Prevailing wisdom in finance suggests long-run investors have a competitive advantage, since they can ride out short-run fluctuations and mispricing, and pursue illiquid investments. This paper investigates if this advantage holds in a portfolio context, examining benefits of international diversification across short- and longrun horizons. Employing a multi-horizon non-parametric filter, increased long-run correlations between international equity markets are detailed, even for synchronized markets. A model replicating the temporal aggregation properties of intermarket correlation is developed, indicating that short-run correlations are downward biased by frictions. Finally, the impact on portfolio allocation is investigated, demonstrating decreased risk reduction benefits in the long-run.

Url http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201502.pdf

Collections Ireland -> University College Dublin -> Business Research Collection
Ireland -> University College Dublin -> Institutes and Centres
Ireland -> University College Dublin -> School of Business
Ireland -> University College Dublin -> College of Business
Ireland -> University College Dublin -> Geary Institute
Ireland -> University College Dublin -> Geary Institute Working Papers