GLOBAL EQIUTY ALLOCATION AS A MEANS OF RISK REDUCTION: A LESSON FOR CENTRAL AND EASTERN EUROPEAN COUNTRIES*

In the paper an empirical analysis is performed on a comprehensive stock exchange database of 17 stock markets, which consists of the eight new CEE members of the enlarged EU, Russia as well as eight developed markets. The database comprises a period of seven years (1997-2003). The aim is to study the benefits from international diversification of equity portfolios from the perspective of the different countries contained in the database. Throughout the presentation a special emphasis is given to the risk reduction benefits of the global equity portfolios for CEE countries. The emerging market portfolios are compared to those of the investors of developed capital markets, while the special and distinctive features of them are revealed and evaluated