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International diversification through Swedish MNEs: An empirical study of risk-return dynamics of Swedish MNE, domestic equity, and global fund portfolios
Jönköping University, Jönköping International Business School.
Jönköping University, Jönköping International Business School.
2025 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

The importance of diversification has been recognized for decades, with the presence of relatively high positive correlations within economies justifying international diversification. By investing in foreign securities, investor can reduce the variance of their portfolios, evident in the consistent decline of portfolio variance across all return levels as the investment universe expands globally. Despite the well-documented benefits of international diversification, investors exhibit a strong preference for domestic equities over foreign ones, a phenomenon known as home bias. Multinational enterprises (MNEs) have been proposed as a potential pathway for overcoming the diversification limitations posed by home bias, possibly offering international exposure within the domestic market. By constructing and comparing efficient frontiers and Sharpe ratios for domestic, MNE, and global portfolios between 2020 and 2023, this study evaluates the relative performance and diversification benefits of MNEs. While MNEs outperform domestic portfolios in the mean- variance space, they only exceed them in the Sharpe ratio within the tangency portfolio under longer investment horizons. The international portfolio achieves the highest Sharpe ratio, with statistically significant results for the tangency portfolio. Overall, the findings suggest that MNEs offer a practical and accessible alternative for investors seeking global exposure without leaving the domestic market.

Place, publisher, year, edition, pages
2025.
Keywords [en]
Multinational Enterprises, Efficient Frontier, International Diversification, Portfolio Performance, Home Bias
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-68255OAI: oai:DiVA.org:hj-68255DiVA, id: diva2:1965785
Subject / course
JIBS, Business Administration
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Available from: 2025-06-18 Created: 2025-06-09 Last updated: 2025-10-13Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf