@article {Estrada93, author = {Javier Estrada}, title = {Fundamental Indexation and International Diversification}, volume = {34}, number = {3}, pages = {93--109}, year = {2008}, doi = {10.3905/jpm.2008.706247}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Just as fundamental indexation is novel and controversial, international diversification is traditional and widely accepted. In this article, the author links both issues and evaluates a fundamental strategy of international diversification. Considering 16 country benchmarks that make up over 93\% of world market capitalization and a 32-year (1974{\textendash}2005) sample period, the results show that a dividend-weighted fundamental index outperforms a cap-weighted index by the substantial margin of 190 bps a year. If, however, investors are willing to abandon cap-weighted portfolios, the results also show that a simple value strategy which weights the same country benchmarks by dividend yield outperforms the dividend-weighted fundamental index by 170 bps a year over the same period. All the strategies evaluated by the authors can be easily implemented with widely available low-cost country index funds and exchange-traded funds.TOPICS: Passive strategies, equity portfolio management, in markets}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/34/3/93}, eprint = {https://jpm.pm-research.com/content/34/3/93.full.pdf}, journal = {The Journal of Portfolio Management} }