A1109
Title: International investing: Diversification and beyond
Authors: Soohun Kim - KAIST (Korea, South) [presenting]
Andreas Neuhierl - Purdue (United States)
Robert Korajczyk - Northwestern University (United States)
Abstract: The purpose is to develop a framework for analyzing individual stocks in a foreign market and constructing effective trading strategies for a home-country investor. The approach exploits (i) mispricing in the foreign market, (ii) risk premia disparities between home and foreign countries, and (iii) foreign country-specific investment opportunities. Applying this framework to 27 developed and developing countries, evidence of substantial international investment opportunities is provided, even among G7 countries. In particular, the profitability of strategies exploiting risk premia disparities challenges the prevailing view of a tightly integrated international financial market.
