Talk:MSCI EAFE index

Table for correlations, open for comment

--Blbarnitz 14:45, 13 February 2013 (CST)

I assume the point is to show correlation as measure of diversification? International Diversification: Why It Still Makes Sense I'm not quite sure what I see here, as the returns move in the same direction regardless if they are highly correlated or not. (Fixed: EAFE - Wilshire, H21 was pointing to the wrong columns.)

Can you point to an example and explain what conclusion can be drawn from the data? --LadyGeek 21:49, 13 February 2013 (CST)


 * These tables and charts are tentatively designed for a footnote entry providing a constantly updated data base, since correlations are dynamic.

Sourced material, beginning list:

Articles

 * Despite financial problems in Europe, international investing still has a place in portfolios, Larry Swedroe.
 * Increasing or decreasing foreign stock holdings can have a major impact on an investor's returns -- here's what to consider, Larry Swedroe.
 * Basics of Asset Allocation, (Part 2 of 2), Rick Ferri, background

Papers

 * Goetzmann, William N., Li, Lingfeng and Rouwenhorst, K. Geert, Long-Term Global Market Correlations (November 2001). NBER Working Paper No. w8612. Available at SSRN: http://ssrn.com/abstract=291287.

''In this paper we examine the correlation structure of the major world equity markets over 150 years. We find that correlations vary considerably through time and are highest during periods of economic and financial integration such as the late 19th and 20th centuries. Our analysis suggests that the diversification benefits to global investing are not constant, and that they are currently low compared to the rest of capital market history. We decompose the diversification benefits into two parts: a component that is due to variation in the average correlation across markets, and a component that is due to the variation in the investment opportunity set. There are periods, like the last two decades, in which the opportunity set expands dramatically, and the benefits to diversification are driven primarily by the existence of marginal markets. For other periods, such as the two decades following World War II, risk reduction is due to low correlations among the major national markets. From this, we infer that periods of globalization have both benefits and drawbacks for international investors. They expand the opportunity set, but diversification relies increasingly on investment in emerging markets. '' --Blbarnitz 12:50, 14 February 2013 (CST)