Evidence on the Performance of Country Index Funds in Global Financial Crisis

During the October 9, 2007-March 9, 2009 period, the U.S. stock market experienced the worst bear market in its history since the Great Depression. Empirical studies show that exchange-traded country index funds can provide portfolio diversification benefits to investors in bull markets. However, they may not be good investment opportunities in bear markets. In this paper, we demonstrate that most country index funds had worse performance than the U.S. S&P 500 Index and they provided little or no diversification benefits to U.S. investors during the October 9, 2007-March 9, 2009 bear market