An Empirical Study of Regional Mutual Funds’ Diversification Value

  • Javier Rodriguez University of Puerto Rico - Río Piedras
Keywords: regional mutual funds, diversification value, portfolio diversification, Herfindahl index


This article studies three samples of United States-based regional mutual funds from the Asia-Pacific, Europe, and Latin America, to assess whether higher fund diversification translates into higher diversification values to fund shareholders. To measure mutual funds’ portfolio diversification, we implement a modified Herfindahl index.  To assess diversification values we employ a methodology that considers Sharpe ratio funds and its correlation with existent portfolios.  We found that Asian-Pacific funds are the most diversified, whereas European funds provide the highest diversification value to fund shareholders. The correlation between fund diversification and diversification value is positive only in the case of Asian-Pacific funds. To the best of our knowledge, the relation between portfolio diversification and diversification value of regional mutual funds has not yet been addressed in the literature.     

Author Biography

Javier Rodriguez, University of Puerto Rico - Río Piedras
Professor of Finance


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How to Cite
Rodriguez, J. (2018). An Empirical Study of Regional Mutual Funds’ Diversification Value. Applied Finance Letters, 7(1), 22-31.