INTERNATIONAL PORTFOLIO DIVERSIFICATION: A MULTIVARIATE ANALYSIS FOR A GROUP OF LATIN AMERICAN COUNTRIES.

Several sets of results have been obtained which show the superiority of multinational diversification within an IU over investment in single countries, even if the portfolios are constrained to consist of equal proportions of stocks from each country. Although all the results reflect the difficulties of examining historical data to estimate future outcomes, their general agreement and consistency over time support the inference that an IU would result in considerable gains. The results of the multivariate analysis are especially important since they show that (1) substantial gains are likely to result from a wide range of investment strategies and that (2) the results are substantially the same for different time periods and can therefore be taken as predictions of the future with some confidence if interpreted in a general manner. The four countries chosen for this study probably do not form a viable grouping for an IU. However, the sample is sufficiently representative to show that, contrary to a common assumption, a great deal of diversification can take place among developing countries in a single geographical area. [ABSTRACT FROM AUTHOR]