IMPACT OF THE EURO ON EUROPEAN PORTFOLIO DIVERSIFICATION
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The inception ofthe euro has led to more transparent pricing ofproduct and valuations offirm" We find evidence that the inception ofa single European market has increased the correlation amount country stock market . While it is generally known that ·tock return correlations among European countries increased as European barrie. · were reduced during the late 1980s and early 1990s, this Ludy offers a more recent update in light of changes instigated by the inception of the euro. Our results have relevant implications for portfolio managers who use the popular top-down investment approach in Europe in which the country i· selected before the industry and company. The top-down approach offers limited diversification benefits. sin ·e markets are now more high~)! integrated as a result ofthe euro.
Abstract
The inception ofthe euro has led to more transparent pricing ofproduct and valuations offirm" We find evidence that the inception ofa single European market has increased the correlation amount country stock market . While it is generally known that ·tock return correlations among European countries increased as European barrie. · were reduced during the late 1980s and early 1990s, this Ludy offers a more recent update in light of changes instigated by the inception of the euro. Our results have relevant implications for portfolio managers who use the popular top-down investment approach in Europe in which the country i· selected before the industry and company. The top-down approach offers limited diversification benefits. sin ·e markets are now more high~)! integrated as a result ofthe euro.