To explain the bias in favor of domestic securities known as the “international diversification puzzle,” the
literature has considered many possible irritants of capital movements across national boundaries but the
results remain inconclusive. This paper demonstrates that this complex multivariate problem can be
addressed within an analytic hierarchy process (AHP)-driv en expert system. The AHP can be modeled to
select an optimal investment portfolio (OIP), herein a multinational portfolio composed of national markets
where barriers to capital flows are least likely to adversely affect its return. Experts examined these barriers
in relation to six national markets and the euro...