Nowhere to Run, Nowhere to Hide : Asset Diversification in a Flat World

We present new international diversification indexes across equity, sovereign debt, and real estate. The indexes reveal a marked and near ubiquitous decline in diversification potential across asset classes and markets for the post-2000 period. Analysis of panel data suggests that the decline is related to higher levels of market credit risk and volatility as well asto technology and communications innovation as proxied by internet diffusion. The decline in diversification opportunity is associated with sharply higher levels of investment risk