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Role of emerging markets vis-à-vis frontier markets in improving portfolio diversification benefits

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  • Thomas, Nisha Mary
  • Kashiramka, Smita
  • Yadav, Surendra Singh
  • Paul, Justin

Abstract

The study examines the value addition provided by frontier markets vis-à-vis emerging markets in improving the diversification benefits of an international portfolio. The analysis is performed for Asia-Pacific and Europe. It also surveys international investors to corroborate the empirical findings. The results indicate that though frontier markets offer higher diversification opportunities than emerging markets, the frontier market investments are recommended for investors with good risk appetite. Asia-Pacific emerging markets perform better than frontier markets in improving the portfolio's performance. European frontier markets' performance was adversely affected by Covid 19 pandemic. Overall, Asia-Pacific equity markets provide greater potential for diversification than their European counterparts.

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  • Thomas, Nisha Mary & Kashiramka, Smita & Yadav, Surendra Singh & Paul, Justin, 2022. "Role of emerging markets vis-à-vis frontier markets in improving portfolio diversification benefits," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 95-121.
    • Handle: RePEc:eee:reveco:v:78:y:2022:i:c:p:95-121
    DOI: 10.1016/j.iref.2021.11.012
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    1. Ali, Fahad & Sensoy, Ahmet & Goodell, John W., 2023. "Identifying diversifiers, hedges, and safe havens among Asia Pacific equity markets during COVID-19: New results for ongoing portfolio allocation," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 744-792.

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    More about this item

    Keywords

    Asia-pacific; Emerging markets; Europe; Frontier markets; International diversification; Portfolio choice;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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