International portfolio diversification through ETFs
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- Master of Science 
This thesis investigates whether the difference in correlation between the US market and a country ETF or its underlying index is due to asynchronous returns or US transitory effects. We study the performance and diversification of twelve iShares funds issued by BlackRock. We include ETFs from different time zones to compare non-overlapping, partially overlapping and funds traded simultaneously. The study uses different frequencies of returns to capture the persistence of tracking errors and correlation characteristics over time. The annual tracking errors are low for all funds adjusted for transaction costs and correlations are similar to their underlying MSCI indices. The tracking difference of the funds are regressed upon several transitory variables. The S&P 500 has a significant effect upon tracking errors for all funds along with exchange rate fluctuations. We find no evidence of irrational pricing and suggest that differences in correlation are mainly due to the stale NAV quotes.
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2017