Potential gains from international portfolio diversification and inter-temporal stability and seasonality in international stock market relationships

In this paper, we find empirical evidence that diversification across countries results in greater risk reduction than diversification across industries. Our inter-temporal stability tests indicate that, the longer the time period considered, the better proxies ex post patterns of co-movement can be for the ex ante co-movements of international stock markets. Our seasonality tests show that international stock market co-movements are stable in the September-May period, but relatively unstable in the May-September period.