Abstract
The models o f portfolio selection developed by Harıy Markowitz and James Tobin provide normative rules for the diversification of risky assets. These models have been extended and empirically tested after their first presentation; later, intemational diversification has been added to them. Both institutional and individual investors are increasingly attempting to diversify risk by spreading their portfolios across different national stock markets. This article reviews the argument for intemational investment, discusses the risk reduction effect of correlations between securities and concludes that emerging markets have an important role to play for asset aîlocation.
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