Diversification Benefits of European Small-Cap Stocks after the Global Financial Crisis and Brexit
Bibliographic record
Abstract
In this article, we investigate the diversification gains obtained from investing in European small-cap stocks, focusing on the periods since the Global Financial Crisis and Brexit. We find mixed evidence to support the assertion that European small-caps provide diversification benefits to a benchmark portfolio of large US stocks. The benefits are also limited when benchmark assets include both a US large-cap portfolio as well as a portfolio of European large-cap stocks. After Brexit, US investors achieve diversification benefits from investments in European large-cap stocks. However, after Brexit, small-cap stocks from only one country in the European Union are shown to offer additional diversification gains. <b>TOPICS:</b>Financial crises and financial market history, portfolio theory, portfolio construction <b>Key Findings</b> • In the aftermath of the Global Financial Crisis, from a US investor’s perspective, the benefits of investing in European small-caps have declined. • Since the UK vote affirming Brexit, with the exception of one country, European small-caps have become even less attractive for US investors. • Brexit has not nullified diversification benefits for large-cap European stocks with significant international exposure.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".