Rigobon, RobertoDidier, TatianaSchmukler, Sergio L.2012-03-192012-03-192011-01-01https://hdl.handle.net/10986/3297This paper studies how portfolios with a global investment scope are allocated internationally using a unique micro dataset on U.S. equity mutual funds. While mutual funds have great flexibility to invest globally, they invest in a surprisingly limited number of stocks, around 100. The number of holdings in stocks and countries from a given region declines as the investment scope of funds broadens. This restrictive investment practice has costs. A mean-variance strategy shows unexploited gains from further international diversification. Mutual funds investing globally could achieve better risk-adjusted returns by broadening their asset allocation, including stocks held by more specialized funds within the same mutual fund family (company). This investment pattern is not explained by lack of information or instruments, transaction costs, or a better ability of global funds to minimize negative outcomes. Instead, industry practices related to organizational factors seem to play an important role.CC BY 3.0 IGOACCOUNTINGARBITRAGEASSET ALLOCATIONASSET ALLOCATIONSASSET GROWTHASSET HOLDINGSASSET MANAGERSASSET RETURNSASSETS UNDER MANAGEMENTBALANCE SHEETSBANKSBASIS POINTSBENCHMARKBENCHMARK INDEXBENCHMARK INDEXESBINDING CONSTRAINTBINDING CONSTRAINTSCAPITAL FLOWSCAPITAL MARKETSCENTRAL BANKCOMMON STOCKSCONFLICTS OF INTERESTCORPORATE BEHAVIORCOST OF CAPITALCOUNTRY PORTFOLIOSDATA AVAILABILITYDEBTDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDIVERSIFICATIONDIVERSIFICATION BENEFITSDOMESTIC INVESTMENTSDOMESTIC MUTUAL FUNDSECONOMIC ACTIVITYEMERGING ECONOMIESEMERGING EQUITY MARKETSEMERGING MARKETEMERGING MARKET ASSETSEMERGING MARKET FUNDEMERGING MARKET FUNDSEMERGING MARKET INDEXEMERGING MARKETSEQUITY MARKETSEQUITY MUTUAL FUNDEQUITY MUTUAL FUND INDUSTRYEQUITY MUTUAL FUNDSEXCESS RETURNSEXPOSUREEXPOSURESFINANCIAL INTEGRATIONFINANCIAL INTERMEDIARIESFINANCIAL MARKETSFINANCIAL SERVICESFINANCIAL SERVICES INDUSTRYFINANCIAL STUDIESFINANCIAL SUPPORTFINANCING COSTSFOREIGN ASSETSFOREIGN FUNDFOREIGN FUNDSFOREIGN STOCKSFUND AGEFUND CATEGORIESFUND INVESTMENTSFUND MANAGERFUND MANAGERSFUND RETURNSFUND SIZEFUND TYPEFUND TYPESFUNDS OF FUNDSGLOBAL ASSETGLOBAL FUNDGLOBAL FUNDSGLOBAL INVESTMENTGLOBAL MUTUAL FUNDSGLOBAL PORTFOLIOGLOBALIZATIONHEDGE FUNDSINCOMEINDIVIDUAL FUNDINDIVIDUAL FUNDSINDIVIDUAL MUTUAL FUNDINDIVIDUAL MUTUAL FUNDSINFORMATION SHARINGINFORMATION TECHNOLOGYINSTITUTIONAL INVESTORINSTITUTIONAL INVESTORSINSTRUMENTINSURANCEINSURANCE PREMIUMINTERNATIONAL ASSETINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL DIVERSIFICATIONINTERNATIONAL ECONOMICSINTERNATIONAL EQUITYINTERNATIONAL INVESTMENTINTERNATIONAL INVESTMENTSINTERNATIONAL INVESTORSINTERNATIONAL MARKETSINTERNATIONAL PORTFOLIOINTERNATIONAL PORTFOLIOSINVESTABLE ASSETSINVESTINGINVESTMENT CHOICESINVESTMENT DECISIONSINVESTMENT FLOWSINVESTMENT IN STOCKSINVESTMENT OPPORTUNITIESINVESTMENT PATTERNINVESTMENT PATTERNSINVESTMENT POLICIESINVESTMENT RESTRICTIONSINVESTMENT STRATEGIESLACK OF INFORMATIONLEVEL OF RISKLOW-INCOME COUNTRIESMARKET CAPITALIZATIONMICRODATAMIDDLE-INCOME COUNTRIESMINIMUM INVESTMENTMINIMUM INVESTMENT REQUIREMENTSMUTUAL FUNDMUTUAL FUND COMPANIESMUTUAL FUND COMPANYMUTUAL FUND DATAMUTUAL FUND FAMILIESMUTUAL FUND FAMILYMUTUAL FUND HOLDINGSMUTUAL FUND INDUSTRYMUTUAL FUND INVESTMENTMUTUAL FUND INVESTMENTSMUTUAL FUND MANAGERSMUTUAL FUND PERFORMANCEMUTUAL FUND PORTFOLIOMUTUAL FUND PORTFOLIOSMUTUAL FUND RETURNSNAVNET ASSETNET ASSET VALUENET ASSETSOFFSHORE FINANCIAL CENTERSOPEN-ENDED FUNDSPARTICULAR COUNTRIESPARTICULAR COUNTRYPENSIONPENSION FUNDSPERFORMANCE EVALUATIONPERFORMANCE OF MUTUAL FUNDSPOLITICAL ECONOMYPORTFOLIOPORTFOLIO ALLOCATIONPORTFOLIO ALLOCATIONSPORTFOLIO CHOICEPORTFOLIO CHOICESPORTFOLIO HOLDINGPORTFOLIO HOLDINGSPORTFOLIO INVESTMENTPORTFOLIO STRATEGYPORTFOLIO WEIGHTPORTFOLIO WEIGHTSPORTFOLIOSREGIONAL FUNDSRETIREMENT SAVINGSRETURNRETURN DATARETURN DIFFERENCESRETURN DIFFERENTIALSRETURN HISTORYRETURN VOLATILITYRETURNSRISK DIVERSIFICATIONRISK TAKINGSECURITIESSECURITY HOLDINGSTOCK HOLDINGSSTOCK TURNOVERSTOCK-PICKINGSTOCKSSUBSIDIZATIONTIME HORIZONTRADINGTRADING COSTSTRANSACTIONTRANSACTION COSTSTYPES OF FUNDSWORLD FUNDSWorld Bank10.1596/1813-9450-5524