In this chapter, we analyze the impact of the investment horizon on international portfolio choice. We approach this issue by considering whether an investor should add investments from other countries to an existing portfolio. The statistical tests that we employ are based on whether or not the investment space can significantly be expanded within a mean-variance framework (spanning tests). Our results indicate that for a US-based investor with a mean-variance utility function diversifying toward other countries and asset classes depends crucially on the investment horizon. This holds especially for portfolios that originally consist of investments in bonds.

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Persistent URL dx.doi.org/10.1057/9780230295223_4, hdl.handle.net/1765/98822
Citation
Tims, B, & Mahieu, R.J. (2010). International portfolio choice: A spanning approach. In Nonlinear Financial Econometrics: Forecasting Models, Computational and Bayesian Models (pp. 51–73). doi:10.1057/9780230295223_4