Weak Evidence for International in Vanguard Research - Am I Missing Something?

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Dandy
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Dandy »

While there is some analysis offered it seems to be a lot of the push for a more global allocation in equities and fixed income is an overemphasis on diversification. No doubt diversification is good but it can be over sold or over hyped. If some is good than more has got to be better. eh?

A recent post compared the returns of the S&P 500 to the Total Stock Market. Over the time the Total Stock Market was introduced I believe the S&P 500 was slightly better over most time periods -- the extra US diversification didn't or hasn't yet borne much if any fruit. Agreed that the time period is too short to draw bedrock conclusions. But, mathematically it would seem that if you drew a 500 size sample of diverse/large stocks out of a 4500? population of US stocks that there might not be a large ongoing performance difference between the "sample and the population. Maybe some members with higher math skills can opine on that.

Should a Canadian diversify by having a large allocation to US stocks? Yes, probably I don't know Canada's percentage of the world's economy but let's say it is 10% and a bit natural resource dependent. How does that compare with a US investor with a bit over 50% of the world's economy and a bit more diverse to boot? The question for long term investors US investors how long will the US economy be so large? The longer the investment timeframe maybe the higher the international diversification might need to be. I don't think a US retiree has the same international equity allocation need as a 25 year old US investor. I think the international equity allocation decision is not as simple as "of course more diversification -- more toward a global weighting is a no brainer".

For fixed income -IF the purpose of that allocation is stability and safety to take the risk on the equity side then there is very little need for international bonds especially anything nearing a global weighting. The US has a vast array of fixed income products of low cost that can satisfy the goal of stability and safety.

I don't think a high allocation to international equities or fixed income for US investors is a bad thing just that it isn't critical and is probably being oversold. I treat international equities as a tilt e.g. 10% or so.
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TD2626
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by TD2626 »

Avo wrote:Here's a simple mathematical exercise that I found instructive.

Assume the US market and the exUS market both have the same variance. Then the optimal (minimum variance) portfolio is 50-50, no matter what the correlation R between the two markets is. (50-50 is also pretty close to current valuations, so this is not a ridiculous model.)

Now add currency variance; model this as a conversion factor of 1+C from exUS to USD, with C having expectation zero and variance V.

Then I find that the minimum-variance portfolio (for a USD-based investor) holds a fraction f_US in the US market given by

f_US = (1-R+V)/(2-2R+V).

Historically R varies between something like 0.5 and 0.9. I can't find long-term data on V for (say) the USD vs the euro, it looks something like V=0.3, but this may be an overestimate long-term.

Anyway, here is what you get from that formula:

Code: Select all

 R    V   f_US
0.9  0.3  0.80
0.5  0.3  0.62
0.9  0.1  0.67
0.5  0.1  0.55
So 20% to 45% exUS (when the market valuation is 50%). Right in line with what is usually advised!
A reasonable deviation of currency risk is probably about 9%.

Data is listed here: https://www.thebalance.com/u-s-dollar-i ... ta-3306249 and here: https://www.portfoliovisualizer.com/bac ... ion1_1=100

(Of course, investing in a dollar index ETF is not a good idea, these are just illustrations to show currency risk)


I think that it may be reasonable to consider international's total risk to be (international market SD^2 + currency risk^2)^1/2.

If so, one has to ask: is international market "base" standard deviation - before the effect of currency risk - larger or smaller than US market's. I would think that due to diversification across economies and protection from declines in a single country, the international SD would be slightly lower than the US's SD before adding in the effect of currency risk (at least for broadly developed market funds, as EM likely has higher risk due to political risk).

So the question is whether the total risk of international (combining base market risk plus currency risk added in quadrature) is higher or lower than the US's. (This assumes no correlation between currency risk and international market performance).
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by nisiprius »

TD2626 wrote:A reasonable deviation of currency risk is probably about 9%... Data is listed here: https://www.thebalance.com/u-s-dollar-i ... ta-3306249...
The standard deviation of that set of numbers is 15.9.
That data covers the time period Jan 2008 - Jun 2017.

Image
Look at it this way: a yearly 10% movement is a very large one in currency exchanges, while a 10% movement happens more often than not in the stock market.
Look at it this way: the dollar index roughly doubled in four years, 1981-1984 inclusive, and roughly halved in three years, 1985-1987 inclusive. Those are close to stock-market-sized movements and rates.
Last edited by nisiprius on Sat Jul 08, 2017 6:35 pm, edited 2 times in total.
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TD2626
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by TD2626 »

nisiprius wrote:
TD2626 wrote:A reasonable deviation of currency risk is probably about 9%... Data is listed here: https://www.thebalance.com/u-s-dollar-i ... ta-3306249...
The standard deviation of that set of numbers is 15.9.
The numbers in the article represent prices of the dollar index, not percentage changes. The standard deviation of the price was indeed 15.96, but the standard deviation of, say, the Dow's price is probably several hundred.

The article (https://www.thebalance.com/u-s-dollar-i ... ta-3306249) cites a source at the bottom that includes more data (https://stooq.com/q/d/?s=dx.f). One has to process the data to get percentage changes out of the quoted prices.

If you take percentage change from one year to the next and find a standard deviation of those yearly percentage changes for the whole series since the 1960s, you get a standard deviation of 8.971%.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by nisiprius »

TD2626 wrote:
nisiprius wrote:
TD2626 wrote:A reasonable deviation of currency risk is probably about 9%... Data is listed here: https://www.thebalance.com/u-s-dollar-i ... ta-3306249...
The standard deviation of that set of numbers is 15.9.
The numbers in the article represent prices of the dollar index, not percentage changes. The standard deviation of the price was indeed 15.96, but the standard deviation of, say, the Dow's price is probably several hundred.

The article (https://www.thebalance.com/u-s-dollar-i ... ta-3306249) cites a source at the bottom that includes more data (https://stooq.com/q/d/?s=dx.f). One has to process the data to get percentage changes out of the quoted prices.

If you take percentage change from one year to the next and find a standard deviation of those yearly percentage changes for the whole series since the 1960s, you get a standard deviation of 8.971%.
Image
You're right. Sorry.

(The 8.93% number is based on the same numbers as the 15.96 number, the ones that were displayed in the article).
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TD2626
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by TD2626 »

So essentially currency risk, going back many decades, is about 9%.
(I think the few basis point discrepancy was my fault)

It seems very bad to invest in something (currency) that has a 9% standard deviation and a 0% expected return. This is why speculating in currency is not a good idea. You would need to be compensated with a return of, say, 5 or 6% at least in order to take on a 9% standard deviation of risk. (look at the risk/return of, say, corporate bonds).

When it comes to international stock, I think the math suggests currency risk isn't as bad as that 9% SD initially makes it seem. The risk should roughly add in quadrature with international stock returns, so if international stocks had a 18% SD before currency risk, they would have a sqrt((18%^2) + (9%^2)) = 20.12% SD after including currency risk. With only 50% of the portfolio in international, and with, say, a 60/40 allocation, currency risk isn't the largest component of overall risk. But it is significant and it does need to be taken seriously. And I think that "currency diversification" isn't a good concept - I better like to think of diversification among economies.

Let's say that US stocks have nominal annual returns of 9% and standard deviation of 18%. So, in light of currency risk, what is the expected risk of the international stocks? Is it really 18%? Since there's no intrinsic reason to believe that Apple will outperform Samsung, that Exxon will outperform Shell, etc, the expected return of US and International would be the same 9%. But because the international fund diversifies across different economies, which have the potential to have some zig while others zag, and because the international fund reduces country-specific "economic meltdown" risk, the international fund's return before currency risk may be somewhat lower- say, 16%. If you include currency risk, you get a total risk of sqrt((16%^2) + (9%^2)) = 18.36%. If one plugs in 18% US risk, 18.36% International risk, and a correlation between US and international of, say, 0.65, a MPT based model would suggest being close to cap weight in international. Unfortunately, international having a return equal to US isn't supported by historical data. Also, historically, international funds have had total risk (including currency risk) of, say, 21.5% - which is higher than US risk. Finally, it is possible that things like EM have higher risk (and higher reward to compensate). This model also assumes political risk is compensated; it may not be fully compensated.

Unfortunately, also, an MPT-based model is enormously sensitive to what one plugs in as expectations regarding risk and currency risk. Slight changes affect outputs of the MPT calculation enormously. Sigh.

I guess this means that being anywhere from, say, 20% to 50% is reasonable, and there are no easy answers beyond that. Pick a number and stay the course.

However, despite this, I still do think that cap weight is an elegant strategy. It is simple, requiring one fund for equities, and it requires no re-balancing. One does not have to get involved in under weighting foreign companies. Additionally, cap weight strategies do not require one to even pick a percentage that goes into international. The market picks it, instead.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by SGM »

Many Vanguard employees are following the lead of Bill McNabb who has stated that owning international decreases risk. He prefers exposure to developed and emerging markets. He makes a case for owning both Ford and Toyota and for buying the whole haystack in a recent blog.

I agree there is more currency risk in owning international and that owning international has not made much difference in the past. I have no idea if it will make a difference in the future. I have a few tilts and don't know if I am hurting or helping my return. Luck has a role to play as well. There is no correct answer to how much international to hold unless you have a crystal ball. But the arguments make for an interesting read.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by coincollector »

I think investing around the world is important because who knows which country will be the next Greece. With the out of control spending by governments worldwide it could hit anywhere at anytime. Were seeing country debt levels that are 100%, 200%, 300% or more of the local countries GDP. Debt levels that could never be paid back. Investing globally is, in my opinion, the best way to diversify governmental stupidly in hopes that the world house doesn't collapse all at once. I'm an optimistic person but the out of control spending by global governments is alarming to me and could become a much greater headwind to investment returns in the coming decades.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by unclescrooge »

InKirkWeTrust wrote:Vanguard's research paper, "Global Equities: Balancing Home Bias and Diversification," seems to provide very weak evidence for the benefits of large international allocations. Yet Vanguard's default option for its all-in-one funds is 40%. Why?
One does not eat volatility in retirement, but rather their cumulative returns.

Given the high valuations in US markets, and low valuations abroad, it makes sense to increase your exposure to the cheaper stocks if you are keen on generating higher returns.

If higher returns are not your style, but instead you opt for more simplicity, then that's fine. No need to do anything.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by dia »

jbranx wrote: At the moment my approximate solution to an insoluble problem is to make a decision to own more of the World just in case.
Simple as that. Just don't go hog wild.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by TD2626 »

SGM wrote:Many Vanguard employees are following the lead of Bill McNabb who has stated that owning international decreases risk. He prefers exposure to developed and emerging markets. He makes a case for owning both Ford and Toyota and for buying the whole haystack in a recent blog.

I agree there is more currency risk in owning international and that owning international has not made much difference in the past. I have no idea if it will make a difference in the future. I have a few tilts and don't know if I am hurting or helping my return. Luck has a role to play as well. There is no correct answer to how much international to hold unless you have a crystal ball. But the arguments make for an interesting read.

I feel that there are only two ways to come up with an international allocation that doesn't involve wishy-washy gut feeling based "making up a number":

1. MPT-based efficient frontier analyses, which would likely support 30-40% if given reasonable inputs.
2. Cap weight, based on efficient market theory.

I think there is a reasonable chance that there could be a consensus around cap weight in the future. Why? Vanguard has been increasing its international recommendations more and more, international costs are coming down, cap weight is simple and non-speculative and doesn't require rebalancing, and Total World Admiral may be created with very low fees in the near future. I also think that the risk-adjusted performance of Total World (before currency risk) will hopefully speak for itself eventually. Additionally, in 20 years, Buffet won't be around to push his US-centric investing approach.

I also like the "floating allocation" that cap weight has. If US as a share of the world goes up or down, so does that fraction in total world. I think that is the rational way to do things.

Look at sectors. Imagine having 10 sector funds, each with 10% of the portfolio. What if one sector suddenly became 20% of the economy? Imagine the re-balancing complexity. Mabye one thing that could be done is to partially currency hedge the international stock allocation (through currency hedged world stock funds) if currency risk is preventing a reasonable international allocation.

As an aside, I just realized Morningstar charts appear to have the option to plot returns converted to any currency, including SDRs. Mabye the SDR graph could help visualize international returns before currency risk.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by pascalwager »

My portfolio currently looks like this:

US stocks 30%
Non-US stocks 27%
US bonds 22%
Non-US bonds 21%

I got frustrated trying to pick the right percentages, so I decided to just let the world market decide. I readjust quarterly based on the four index market value proportions.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Lauretta »

Avo wrote:Here's a simple mathematical exercise that I found instructive.

Assume the US market and the exUS market both have the same variance. Then the optimal (minimum variance) portfolio is 50-50, no matter what the correlation R between the two markets is. (50-50 is also pretty close to current valuations, so this is not a ridiculous model.)

Now add currency variance; model this as a conversion factor of 1+C from exUS to USD, with C having expectation zero and variance V.

Then I find that the minimum-variance portfolio (for a USD-based investor) holds a fraction f_US in the US market given by

f_US = (1-R+V)/(2-2R+V).

Historically R varies between something like 0.5 and 0.9. I can't find long-term data on V for (say) the USD vs the euro, it looks something like V=0.3, but this may be an overestimate long-term.

Anyway, here is what you get from that formula:

Code: Select all

 R    V   f_US
0.9  0.3  0.80
0.5  0.3  0.62
0.9  0.1  0.67
0.5  0.1  0.55
So 20% to 45% exUS (when the market valuation is 50%). Right in line with what is usually advised!
hi Avo, I'm not familiar enough yet with the subject to follow your calculation: what would your model give for a Euroland based investor? (how much to Euroland and how much to ex-Euroland?) Thanks!
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Avo »

Well it seems my V=0.3 is much too high. A standard deviation of 0.1 (that is, 10%) corresponds to a variance of just 0.01. (Variance is the square of standard deviation.) A +/- 50% swing with a linear path (as seen in the 1980s in Nisi's plot) is a variance of just 0.08.

With these smaller variances, it seems that MPT would suggest only a modest tilt away from the world market towards one's home currency, say 5% or so.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by SeeMoe »

I'm roughly 26% international stock index fund now. Down from 40% when I had a Vanguard advisor service agent. Have zero international bond index now too. It was about 30% of the bonds in our senior 40/60 AA folios. Just don't care for international bonds what with hedging, converting to USD...Am I wrong? I feel good about it...

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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Lauretta »

Avo wrote: With these smaller variances, it seems that MPT would suggest only a modest tilt away from the world market towards one's home currency, say 5% or so.
Ah ok; but if your calculation was based on modern portfolio theory (as I said I didn't understand it), apparently many people question whether one should invest using that approach at all. This paper even questions whether teaching the related subject of CAPM is ethical!! (the author thinks it isn't)
https://papers.ssrn.com/sol3/papers.cfm ... id=2980847
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by sls239 »

I'll preface by saying I'm not trying to be political -

But I think this question comes up because when people look at risk, an awful lot of people aren't just looking at the risk of losing money, they are looking at what the loss of that money would mean to their lives.

People point to Japan as a kind of look at how bad it could be scenario - and yet the life expectancy in Japan is higher than the US. Are the Japanese people really suffering from their stock market crash the way many of us in the USA believe we would suffer?

The US is different. Not necessarily because of their stock market, but the fact that a lot of middle class Americans are looking to the stock market to protect their middle class standard of living, which isn't necessarily the case in many other countries with more generous social insurance, pension plans, and universal healthcare.

And of course large stock market drops in the past have resulted in fundamental changes in the economic fabric of the country. Not just in the great depression out of which emerged social security, but look at the largest recent expansion of the social safety net - the ACA passed by those elected in 2008. And medicare part D - the largest change in medicare history - passed shortly after the tech bust 9/11 recession.

I think it reasonable to say that the US government seems to treat domestic stock crashes significantly differently than international ones and thus makes the case for a middle class American to have a US bias in their investing when looking at the big broad picture.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by TD2626 »

Avo wrote:Well it seems my V=0.3 is much too high. A standard deviation of 0.1 (that is, 10%) corresponds to a variance of just 0.01. (Variance is the square of standard deviation.) A +/- 50% swing with a linear path (as seen in the 1980s in Nisi's plot) is a variance of just 0.08.

With these smaller variances, it seems that MPT would suggest only a modest tilt away from the world market towards one's home currency, say 5% or so.
What did you do for that calculation? Did you take into account the correlation between domestic and international? The correlation is probably around 0.66 (from the Simba spreadsheet).

For my calculation, I used SD_Portfolio=SQRT(((f_international^2)*(SD_international^2)) + ((f_US^2)*(SD_US^2)) + 2*f_US*f_international*SD_international*SD_US*correlation)), which is the square root of the "two asset - portfolio variance" equation listed here: https://en.wikipedia.org/wiki/Modern_po ... ted_return.

I then substituted in the following:
f_international=(1-f_US) [[used since the portfolio weightings have to add up 1]]
SD_international=(SQRT(SD_international_market_risk^2 + SD_Currency_risk^2)) [[used since we decided to break international risk into market and currency risk in the model]]

Thus, the equation for total portfolio Standard Deviation is:
SD_Portfolio=SQRT((((1-f_US)^2)*((sqrt(SD_international_market_risk^2 + SD_Currency_risk^2))^2)) + ((f_US^2)*(SD_US^2)) + 2*f_US*(1-f_US)*(sqrt(SD_international_market_risk^2 + SD_Currency_risk^2))*SD_US*Correlation))

You can then plug in numbers for SD_US (probably around 18% based on history), SD_International_market_risk, SD_currency (we decided on 9% for this based on history), and correlation (probably around 0.66 based on history. If you assume the standard deviation that represents international market risk before currency risk is added in is the same 18% as the US's, then my model would say one should be about 33% international. (Plot the total portfolio risk vs f_US to minimize) If there is a benefit from diversifying among economies, such that international market risk is, say, 16% before currency risk is added in, then the analysis supports cap weight.

(This assumes that I somehow did all the math right. Sorry that there's no easy way to post long equations).
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by TinkerPDX »

Dirghatamas wrote:The way you are posing the question is backwards (IMO)

The logical starting position for investors is to start with market cap weighted stocks. That is called the world stock index. Then you tilt (if desired) in favor of or away from certain sectors (energy, technology, financial whatever) or factors (value, growth, size whatever) or country/region (home country, international, emerging whatever).

The onus is on the investor to justify to themselves WHY they want to tilt away from the market consensus. Consider that much of the invested money in stocks is not by retail investors (who tend to have huge home country bias) but by large sovereign funds/ pension funds/ endowments..who tend to flow more freely across the world. The extra cost of international investing has come down markedly over the last two decades. The currency fluctuation is a feature that can both help you or hurt you so you can't classify it as positive or negative a priori.

I don't invest US/International by any fixed %. I just invest in world stocks because I can never convince myself strongly enough that any tilt I like will beat the market long term.
Well said.

Personally, I'm 50-50 because it approximates world cap, and because ex-US is now almost as cheap as US via indexes which can hedge currency risk cheaply too, so there seems to be no reason not to.

Also reduces the risk of the unlikely, but potentially devastating to all-US investors, that there is a prolonged period of serious US underperformance.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Dead Man Walking »

nisiprius wrote:.
I think some of Vanguard's behavior could be explained if Vanguard thinks that they are growing so big that they have outgrown the United States. Similarly, their failure to go in for any kind of factor tilts (e.g. small value) might be explained by a feeling that they are getting so big that if all their customers had small value tilts, there wouldn't be enough small value to go around. Another possibility is that Vanguard feels that the future for them is in becoming an international company and they are trying to build up their core competencies in investing everywhere, not just in the U.S.[/quote]

Vanguard executives realize that globalization is the future and want to become an international player. I invest in international stocks because there are so many great companies based in other countries. I'm not convinced that international bonds are a good investment with a yield of 0.75%.

DMW
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by SimpleGift »

nisiprius wrote: Another possibility is that Vanguard feels that the future for them is in becoming an international company and they are trying to build up their core competencies in investing everywhere, not just in the U.S.
Dead Man Walking wrote:Vanguard executives realize that globalization is the future and want to become an international player.
Along these lines, a Financial Times article from May of this year: Vanguard takes tilt at fast-growing Chinese market
Financial Times wrote:Vanguard is stepping up its presence in China by opening an office in Shanghai that should pave the way for it to sell its funds to the country’s fast-growing market of retail investors. The world’s second largest fund company by assets has joined a clutch of rivals — including Axa Investment Managers, Invesco and Neuberger Berman — in establishing what is known as a wholly foreign-owned enterprise. Through these, international fund managers can avoid setting up businesses in China controlled by local partners.

Pennsylvania-based Vanguard’s latest move in China highlights its focus on international expansion, and follows plans outlined last week by the company to push into the UK market through an online investment platform. “This new milestone solidifies our commitment to China,” said Bill McNabb, chairman and chief executive of Vanguard. “Bringing our unique and proven investment approach to the millions of investors in China is an important initiative for Vanguard’s international business.”
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Thesaints »

What does it take to have f_US < 0.5 ?
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by lack_ey »

Thesaints wrote:What does it take to have f_US < 0.5 ?
Under what kind of assumptions?

Using the very limited framework(s) discussed some above and assuming equivalent return and vol before currency effects, you're not going to end up with a US weighting under 50%.

Higher return from ex-Us would do it, but not necessarily because it would depend on the combination of the extra return and the other parameters such as vol, correlation, etc.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Thesaints »

lack_ey wrote:
Thesaints wrote:What does it take to have f_US < 0.5 ?
Under what kind of assumptions?

Using the very limited framework(s) discussed some above and assuming equivalent return and vol before currency effects, you're not going to end up with a US weighting under 50%.

Higher return from ex-Us would do it, but not necessarily because it would depend on the combination of the extra return and the other parameters such as vol, correlation, etc.
So, assuming cap weight is 50 US, 50 ex-US there is no combination of correlation index and currency exchange volatility that brings the US quota under 50% ? Why is it so ? Certainly, for R=1 and V=0 it is absolutely equivalent to have 100% US, or 100% ex-US, or some of one and some of the other.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Uncle Pennybags »

This thread is way beyond my understanding; one should never invest in something one doesn't understand. Carry on.
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Uncle Pennybags »

Today the dollar is down against other currencies. That should be good for foreign stock value but foreign stocks are down. It appears when missiles are flying over Japan the world sells itself and buys US. No fancy formulas, just an observation.
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CULater
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by CULater »

There is no evidence that I know of that currency risk has an expected return associated with it, unlike equity risk for example. It is just risk unrewarded and unrequited. Makes more sense to me to invest internationally by hedging currency risk.
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Uncle Pennybags
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Re: Weak Evidence for International in Vanguard Research - Am I Missing Something?

Post by Uncle Pennybags »

CULater wrote: Wed Aug 30, 2017 10:07 am There is no evidence that I know of that currency risk has an expected return associated with it, unlike equity risk for example. It is just risk unrewarded and unrequited. Makes more sense to me to invest internationally by hedging currency risk.
Hedging will cost more that the 7 bases points foreign stocks have to make up each year compared to US.
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