Do Frontier Market Equities have a Role to Play in a Diversified International Equity Portfolio?
AbstractThis study investigates the impact of including frontier market equities in a diversified equity portfolio consisting of emerging and developed markets equities. It is found that while emerging market equity indices have been highly correlated with those of developed markets, correlations between the investable frontier market indices and both the emerging and the developed market indices have been significantly lower. The paper shows that the inclusion of equities from frontier markets in an internationally diversified equity portfolio is significantly advantageous, leading to portfolios with superior risk-return characteristics. However, both, the choice of the frontier market index and of the period of study affect the results.
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Bibliographic InfoArticle provided by Africagrowth Institute in its journal African Finance Journal.
Volume (Year): 12 (2010)
Issue (Month): Conference Issue ()
Frontier markets; Correlations; Efficient frontiers; Diversification;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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