Is International Investment Diversification Prudent for the Individual or Corporate Investor

This paper examines the benefits of international diversification for the individual and corporate investor and attempts to determine whether international diversification is prudent. Although research supports as well as refutes the claim that international diversification improves performance, results vary due to the non-static nature of national markets’ returns, standard deviations, and correlations. As a result, data for the research are dependent on the period of study. As global markets have become more synchronized and US equities have had an unusual increase in value recently, studies relying on newer data argue against the benefits. However, because domestic investing limits diversification potential, international diversification is prudent for long-term investors.