Should U.S. investors hold foreign stocks?

Li, Kai; Sarkar, Asani

Journal Article

Should U.S. investors hold foreign stocks?

Abstract: U.S. investors have traditionally been reluctant to acquire foreign securities_in part, perhaps, because they fear that restrictions on trading in foreign markets will sharply limit any gains they might realize from diversifying their portfolios. An analysis of the effects of one type of restriction, short-sale constraints, on stock returns between 1976 and 1999 suggests that investing in emerging market stocks offers substantial benefits even when a ban on short sales is in place.

Keywords: Investments, Foreign - United States; Financial markets; International finance;