Study On Diversification Benefits Of International Stock Markets From A Chinese Investor’s Perspective

The paper attempts to explore diversification benefits for Chineseinvestors to diversify their portfolios which chiefly concentrate on USand HK markets previously into the stock markets of India, Brazil, Russiaand Turkey.The paper employs correlation coefficient, efficient frontier and sharpratio to examine existence of diversification benefits by investing in thestudied emerging markets from a Chinese investor’s perspective.Comparisons are empirically done based on different regions of thestudied emerging stock markets, the developed stock markets of US andHK and the combination of the two, and also on different periods of pre-and post-international financial crisis (IFC) to study IFC impact on thediversification benefits. Next, potential investment opportunities in thestudied stock markets are discussed in line with analysis on the medium-and long-term growth momentums in the economy fundamentals. Finallycurrent equity–related QDII funds are reviewedThe paper concludes that generally there exist diversification benefitsto invest in the stock markets of India, Brazil, Russia and Turkey forChinese investors. And the benefits are more apparent in normal economyconditions. Nonetheless, in downturn economy and crisis (abnormal) thebenefits of investing in the studied emerging markets still exist, but aChinese investor can better off by investing in the developed stockmarkets of US and HK on account of mounting risk-aversion sentiment.