Abstract
The benefits from international portfolio diversification have been widely researched but mostly from a U.S. investor's viewpoint. This paper investigates diversification benefits and currency hedging benefits for the U.S. investor and for investors from six other countries. The results support international diversification for risk reduction purposes but not as a way to increase returns. Hedging provides further risk reduction. However, it represents only about one-half the risk reduction that is provided by forming international portfolios. Ignoring transactions costs, the effect of currency hedging on investors' rates of return was to move their return closer to the average return that is obtained worldwide.
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