Review of Quantitative Finance and Accounting

, Volume 40, Issue 2, pp 251–271 | Cite as

International equity flows, marginal conditional stochastic dominance and diversification

  • Ephraim Clark
  • Konstantinos Kassimatis
Original Research


The weak empirical evidence linking diversification and international equity flows calls into question the diversification paradigm at the international level and the analytical framework it implies. Using the concept of Marginal Conditional Stochastic Dominance (MCSD) to estimate the diversification opportunities, this paper reexamines the role that diversification opportunities play in the determination of international equity flows. It provides strong evidence that when diversification opportunities are measured in terms of MCSD, they are significant determinants of international equity flows. Capital flows into dominant markets and flees markets that are dominated. These results are robust with respect to a range of conventional control variables documented in the outstanding literature.


Equity flows Diversification Marginal conditional stochastic dominance 

JEL Classification

G11 G15 


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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Middlesex University Business SchoolHendonUK
  2. 2.School of Finance Research Center (LSMRC)Univ. Lille Nord de FranceEuralilleFrance
  3. 3.Department of Business AdministrationAthens University of Economics and BusinessAthensGreece

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