Aurora Borealis
1 April 2017 Financial Analysts Journal Volume 73, Issue 2

Mononationals: The Diversification Benefits of Investing in Companies with No Foreign Sales

  1. Cormac Mullen
  2. Jenny Berrill

Few papers have focused on the diversification benefits of companies with domestic sales only, or mononationals. We compare the international diversification benefits of equity portfolios of various multinational classifications. We find that multinationality has a significant impact on diversification benefits, with foreign “domestic” stocks offering the most benefits and foreign “global” stocks the least, and that investing in stocks with low sales in the investor’s home region leads to higher benefits. For portfolio managers, we suggest that a portfolio of mononationals offers the potential for greater benefits than a portfolio of multinationals. Our results are strongest for US, eurozone, UK, and Japanese investors.

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