2 February 2023 Financial Analysts Journal Volume 79, Issue 2

Diversification During Hard Times

  1. Najah Attig
  2. Oumar Sy
Analysis of long-term stock data from 48 developed and emerging markets indicates that international diversification is the best risk-reduction tool. The benefits are countercyclical and persist through negative events and crisis periods.
Diversification during Hard Times - Read the Complete Article in Financial Analysts Journal CFA Institute Member Content In Practice: Member Companion Feature Read Brief CFA Institute Member Content


Using a large sample of stocks from 48 developed and emerging markets over 1995 to 2021, we find evidence that suggests that international diversification is the best risk-reduction tool when all markets are considered. However, after the turn of the millennium, industrial diversification is the best alternative for funds limited to developed markets, especially when they are restricted to a region. Importantly, the benefits of diversification persist through hard times, such as the Asian financial crisis, the IT bubble burst, the global financial crisis, and the COVID-19 pandemic, demonstrating their countercyclicality and proving their value when investors need them the most.

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.