AcademicArticleSCO_84924764094

abstract

• © 2014, Savez Ekonomista Vojvodine. All rights reserved. We estimate the long-run relationships among NAFTA capital market returns and then calculate the weights of a ¿time-varying minimum variance portfolio¿ that includes the Canadian, Mexican, and USA capital markets between March 2007 and March 2009, a period of intense turbulence in international markets. Our results suggest that the behavior of NAFTA market investors is not consistent with that of a theoretical ¿risk-averse¿ agent during periods of high uncertainty and may be either considered as irrational or attributed to a possible ¿home country bias¿. This finding represents valuable information for portfolio managers and contributes to a better understanding of the nature of the markets in which they invest. It also has practical implications in the design of international portfolio investment policies.