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Purpose-The main purpose of this paper is to investigate whether Chinese investors can benefit from intational diversification and where these benefits are to be found.Design/methodology/approach-This paper applies an expanding optimization procedure,which is different from the econometric methods or Monte Carlo simulations adopted in many empirical investigations in the literature.The authors’ analysis is based on various realized portfolios that are set up at different dates in the sample period.Findings-Based on a stream of realized portfolios,the authors show that Chinese investors can gain substantially in terms of risk reduction as they venture into foreign markets,regardless of the region into which they choose to diversify and whether in-sample or out-of-sample performance is evaluated.However,the optimal strategies under consideration cannot achieve higher out-of-sample expected rets and risk-adjusted rets than does the domestic investment.Originality/value-In contrast with those in the literature,the authors’ analysis is based on the out-of-sample performance of a series of realized optimal portfolios.Their method can address time-varying correlations that are ignored in most previous research.In addition,this method not only allows them to analyze sizes of diversification benefits but also enables them to examine the major characteristics of intational portfolios to gauge the effectiveness of different diversification strategies.