Exploring the diversification benefits of US international equity closed-end funds

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I use the simulation approach of Jobson and Korkie (J Portfolio Manag 7:70–74, 1981), combined with Michaud optimization (Michaud and Michaud, Efficient asset management: a practical guide to stock portfolio optimization and asset allocation, Oxford University Press, Oxford, 2008), to evaluate whether US international equity closed-end funds (CEF) provide out-of-sample diversification benefits. My study finds that international CEF do not provide diversification benefits across the whole sample period. However, the out-of-sample diversification benefits of international CEF do vary across economic states. I find that there are significant diversification benefits when the lagged one-month US Treasury Bill return is lower than normal, and when higher than normal, regardless of the benchmark investment universe used.

Original languageEnglish
Pages (from-to)297-320
Number of pages24
JournalFinancial Markets and Portfolio Management
Issue number3
Early online date29 Jun 2021
Publication statusE-pub ahead of print - 29 Jun 2021


  • diversification benefits
  • resampled portfolio efficiency
  • closed-end funds
  • US Treasury Bill


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