Hi Nick,

Thanks for commenting, and thank you for catching the error. You are absolutely correct about the missing risk free return. In developing the table, my spreadsheet equation missed a cell that would have subtracted 5.09% from the annualized returns of the three portfolios (US, Global, Diversified). As a result the Sharpe Ratios should be: US = 0.342, Global = 0.246; Diversified = 0.353.

This mistake, however, does not change any of my conclusions about the merits of a global equity allocation. The originally published numbers reflect a 4.54% improvement in Sharpe Ratio, whereas using the correct data shows a 3.27% improvement in Sharpe Ratio.

As I state within the article, the modest improvement in Sharpe Ratio is not enough to justify global diversification, but the argument is strengthened by: (1) different levels of return and volatility, (2) performance and correlations during periods of negative US stock performance, (3) the historical tendency of global stocks to outperform following periods of negative returns.

My apologies to everyone for the error and many thanks to Nick for catching it!

Peter