Effects of Currency and International Diversification on the Risk and Return of Brazilian Investment Portfolios: An Empirical Analysis
Effects of Currency and International Diversification on the Risk and Return of Brazilian Investment Portfolios: An Empirical Analysis
DOI:
https://doi.org/10.51473/rcmos.v1i2.2025.1603Keywords:
International Diversification. Exchange Rate. Risk and Return. Investment Portfolios. Portfolio Efficiency.Abstract
The integration of financial markets and the exchange rate volatility in the Brazilian economy highlight the need for efficient international asset allocation. This study analyzes the effects of currency and international diversification on the risk and return of Brazilian portfolios, assessing its impact on portfolio efficiency. The mean-variance model by Markowitz (1952) was applied to data from 2015 to 2024, considering different exposure levels to foreign assets with and without hedging. The results show that allocating between 15% and 30% to international assets increases risk-adjusted returns and reduces volatility in local currency. Partial currency exposure also acts as protection against real depreciation without harming long-term performance. It is concluded that international diversification is essential for portfolio management in Brazil, promoting stability and preserving purchasing power amid domestic macroeconomic instability.
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Copyright (c) 2025 Isabela Bessa dos Santos Rosa (Autor)
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