The Performance of International Equity Portfolios

This paper evaluates the ability of U.S. investors to allocate their foreign equity portfolios across 44 countries over a 25-year period. The authors find that U.S. portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. They test whether this strong performance owed to trading expertise or longer-term allocation expertise. The evidence is overwhelmingly against trading expertise.