INTERNATIONAL PORTFOLIO DIVERSIFICATION IN ASIAN SUB-CONTINENT MARKETS

Abstract

Portfolio Management has been used as an effective method for evaluating the value of financial assets and identifying the best obtainable investment scenarios for investors. Portfolio theory recommend’s that returns can be increased and risks can be reduced by diversifying in international markets as they have low correlation with domestic markets. This paper examines the relationship and linkage of Asian subcontinent’s developing markets comprising India, Pakistan, and Sri Lanka. Research also goes on to establish whether investing in Asian subcontinent markets will increase diversification benefits or not. The time period of the study is from 2001 to 2010. It has been observed that lower the co-movement among various global markets better it is for an investor to diversify in international markets. The results of this study suggest that the investor from the developed market is better off in investing in mature markets.