This research addresseswhether geographic diversification provides benefits over industry diversification in the Eurozone. Our contribution is to show that in the absence of constraints, no empirical evidence is found to support the argument that geographic diversification dominates industry diversification, except in the euro subperiod. With short-selling constraints, however, the tangency portfolio of geographic diversification is not attainable by industry diversification. In out-of-sample geographic minimum variance portfolios outperform industry portfolios in economic terms, although we cannot establish statistical significance.
RAMOS, S. and EHLING, P. (2006). Geographical versus Industrial Diversification: constraints matter. Journal of Empirical Finance, 4(5), pp. 396-416.