Diversification and Risks Management: A Comparative Analysis of Norway's Government Pension Fund and China Investment Corporation.

Abstract

Abstract This research conducts a comparative analysis of the risk management practices of the two largest Sovereign Wealth Funds: Government Pension Fund Global (GPFG) and China Investment Corporation (CIC), examining how these practices influence their diversification strategies in order to achieve investment objectives. Data relating to risks management and diversification were obtained from the annual reports of both organizations, while economic and political risks, inflation rates, and exchange rates data were obtained from World Bank publications. Descriptive statistics and the Augmented Dickey-Fuller (ADF) unit root test were employed to analyse the data. The research findings indicate no strong relationship between the independent and the dependent variables, suggesting that for large funds like GPFG and CIC, investment decisions are driven by a broader set of factors, including market-specific indicators (stock market volatility, market liquidity, and credit spreads) and financial indicators (corporate earnings growth, dividend yields, and price-to-earnings ratio).