Abstract
AbstractPortfolio selection models have been applied principally to common stocks traded in the United States and in foreign stock markets. This study examines the efficient set of portfolios selected from a choice set that includes returns derived from domestic and international corporate bond and government bond indices as well as domestic and international stock indices. To assess the benefits of international multi‐asset diversification, the authors examine the following issues: (1) the extent to which international and domestic fixed‐income securities are included in efficient portfolios; (2) the effect on efficient set composition of using the Sharpe portfolio selection model as compared to the Markowitz portfolio selection model; (3) the sensitivity of efficient set characteristics produced from a single‐index based portfolio selection model to alternative world market indices; and (4) the correspondence between expected and realized portfolio risk and return for the different portfolio selection models.
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