By Michael BlandingInvestors in global equity markets have traditionally hedged their bets, casting their investments far and wide across the world. Written with HBS doctoral students Zixuan (Kevin) Wang and John Zhou, Global Portfolio Diversification for Long-Horizon Investors has become one of the top downloaded papers on the online Social Science Research Network, sparking intense interest in the value of diversification in global investing. They found overwhelmingly that it was investor sentiment that became more correlated, not the underlying fundamentals. Thus, for investors looking beyond a 10- to 20-year time frame — including individuals saving for retirement, college endowments, foundations, pension funds, and sovereign wealth funds — global diversification still makes sense. Since they are more exposed to transitory changes in market value, they are less able to ride out those discount shocks caused by investor sentiment.

Source: Forbes June 13, 2017 17:57 UTC