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Opportunities And Costs Of Portfolio Diversification In Sadc'S Smallest Equity Markets

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  • Bruce Hearn
  • Jenifer Piesse

Abstract

This paper contrasts the performance of three time series models, a simple stochastic drift, GARCH, and a time varying parameter CAPM for three of SADC's smallest equity markets: Namibia, Swaziland and Mozambique. Analysis of the portfolio characteristics for each reveals the level of integration with South Africa using optimised portfolio frontiers. In addition, the implications of adopting a minimum investment retention levy by the smaller states is examined. Namibia is found to exhibit the greatest degree of integration with South Africa, followed to a much lesser extent by Swaziland with Mozambique. The evidence suggests that investors in the smaller markets would face considerable additional costs should such a policy be adopted.

Suggested Citation

  • Bruce Hearn & Jenifer Piesse, 2008. "Opportunities And Costs Of Portfolio Diversification In Sadc'S Smallest Equity Markets," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 399-426, September.
    • Handle: RePEc:bla:sajeco:v:76:y:2008:i:3:p:399-426
    DOI: 10.1111/j.1813-6982.2008.00203.x
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