DP3086 Portfolio Diversification: Alive and Well in Euroland!

Author(s): Kpate Adjaoute, Jean-Pierre Danthine
Publication Date: November 2001
Keyword(s): euro, portfolio diversification, return dispersion
JEL(s): F30, G11, G15
Programme Areas: International Macroeconomics, Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3086

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.