September 2004 (Revised October 2004)

The Performance of International Portfolios

Charles P. Thomas, Francis E. Warnock, and Jon Wongswan


This paper evaluates the performance of U.S. investors' portfolios in the equities of over 40 countries over a 25-year period. We find that these portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We uncover three potential reasons for this success. First, U.S. investors abstained from momentum trading and instead sold past winners. Second, conditional performance tests provide no evidence that the superior (unconditional) performance owed to private information, suggesting that the successful exploitation of publicly available information played a role. Third, the documented preference for cross-listed and well-governed foreign firms appears to have served U.S. investors well. We conclude with a short discussion of the implications of our findings for the home bias literature.

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Keywords: Home bias, momentum, contrarian, conditional performance measures, equities, bonds

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Last Update: January 11, 2021