Download or read book The 'Bear' and the Benefits of International Portfolio Diversification written by Rui T. Dias and published by . This book was released on 2006 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to review literature on capital asset pricing models relatively to investment in international assets. Furthermore, we applied the concepts in an empirical analysis of risk diversification and capital asset pricing. We provided a practical exercise on the risk diversification by using recent data that goes through a bear market period. We found evidence that the correlation was time-varying depending on the status of the market.We applied the simple CAPM model to the international setting. The results were consistent with the required restrictions. In the first part of the paper we revised the foundations of the portfolio diversification literature; in the second part we addressed the problem of the diversification of the risk in international investments, in the third part we tested the basic International Capital Asset Pricing Model to the Italian data and in the final part we presented our conclusions.