Correspondence: Joëlle Miffre, EDHEC Business School, 393 Promenade des Anglais, Nice 06202, France. Tel: +33 (0)4 93 18 32 55; Fax: +33 (0)4 93 1878 41; E-mail: Joelle.Miffre@edhec.edu

¹is Associate Professor of Finance at EDHEC Business School. My research focuses on portfolio management, with special emphasis on alternative assets (hedge funds, commodities), performance evaluation, non-normality risks, ETFs and momentum strategies.

Received 29 March 2007; Revised 29 March 2007.

Abstract

The paper shows that country-specific exchange traded funds (hereafter ETFs) enhance global asset allocation strategies. Because ETFs can be sold short even on a downtick, global strategies that diversify risk across country-specific ETFs generate efficiency gains that cannot be achieved by simply investing in a global index open or closed-end fund. Besides, the benefits of international diversification can be achieved with country-specific ETFs at a low cost, with a low tracking error and in a tax-efficient way. For all these reasons, country-specific ETFs may be considered as serious competitors to traditional country open and closed-end funds.