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The case for international diversification (Investment Insight)

By Global Equities Team, Aberdeen

The benefits of investing internationally have been well documented and yet investors have continued to invest a disproportionate amount in stocks listed on their home market. This phenomenon, termed ‘home-bias’, became apparent following the most recent global financial crisis. Starting in the US with sub-prime mortgages and the collapse of Lehman Brothers, shockwaves were sent around the world leading to the near-collapse of some of the most established international markets. Globalisation has allowed investors to access new investment opportunities and better risk-adjusted returns, but as correlations between markets increased, sceptics have started to question the benefits of international diversification.

With this in mind, it is worth considering if the case for international diversification still stands.

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