Report
Patrick Artus

Financial globalisation eliminates the gains from international portfolio diversification and so eventually leads to financial deglobalisation

Financial globalisation leads to a situation where shocks to different countries’ financial markets are increasingly correlated. This obviously reduces the utility of international portfolio diversification, since, if the same shocks appear at the same time in different regions, losses in one region can no longer be offset by possible gains in another region. We look at how correlations between financial asset prices in the different regions have evolved. We find that correlations between changes in long-term interest rates and stock market indices have risen over time. If financial globalisation eliminates the utilit y of international portfolio diversification, then , curiously , it may lead to financial deglobalisation and therefore to a financial globalisation cycle .
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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