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An investigation of the benefits of portfolio investment in Central and Eastern European stock markets

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  • Middleton, C.A.J.
  • Fifield, S.G.M.
  • Power, D.M.
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    Abstract

    This paper: (i) examines the potential benefits from diversifying into eight stock markets of Central and Eastern Europe (CEE); and (ii) quantifies the importance of country, industry and time factors in CEE equity returns. The findings suggest that substantial benefits exist from investing in CEE stock markets and that they accrue more from the geographical spread than from the industrial mix of the equities included in the portfolio. However, the returns earned by CEE equities vary dramatically over time. This variability may hamper the efforts of investors attempting to exploit the diversification "free lunch".

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    Bibliographic Info

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 22 (2008)
    Issue (Month): 2 (June)
    Pages: 162-174

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    Handle: RePEc:eee:riibaf:v:22:y:2008:i:2:p:162-174

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    Web page: http://www.elsevier.com/locate/ribaf

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    References

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    1. John L. Evans & Stephen H. Archer, 1968. "Diversification And The Reduction Of Dispersion: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 23(5), pages 761-767, December.
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    5. Kalotay, Kalman, 2004. "The European flying geese: New FDI patterns for the old continent?," Research in International Business and Finance, Elsevier, vol. 18(1), pages 27-49, April.
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    7. Claessens, Stijn & Dasgupta, Susmita & Glen, Jack, 1995. "Return Behavior in Emerging Stock Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 131-51, January.
    8. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
    9. Calum A.J. Middleton & Suzanne G.M. Fifield & David M. Power, 2007. "Investment in Central and Eastern European equities: An investigation of the practices and viewpoints of practitioners," Studies in Economics and Finance, Emerald Group Publishing, vol. 24(1), pages 13-31, March.
    10. Serra, Ana Paula, 2000. "Country and industry factors in returns: evidence from emerging markets' stocks," Emerging Markets Review, Elsevier, vol. 1(2), pages 127-151, September.
    11. Claessens, Stijn, 1995. "The Emergence of Equity Investment in Developing Countries: Overview," World Bank Economic Review, World Bank Group, vol. 9(1), pages 1-17, January.
    12. Campbell R. Harvey, 1994. "Conditional Asset Allocation in Emerging Markets," NBER Working Papers 4623, National Bureau of Economic Research, Inc.
    13. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
    14. S. G. M. Fifield & D. M. Power & C. D. Sinclair, 2002. "Emerging stock markets: a more realistic assessment of the gains from diversification," Applied Financial Economics, Taylor & Francis Journals, vol. 12(3), pages 213-229.
    15. Mockaitis, Audra I., 2005. "The race to EU integration: How many and how high are the hurdles?," Research in International Business and Finance, Elsevier, vol. 19(2), pages 195-199, June.
    16. Theodore Syriopoulos, 2004. "International portfolio diversification to Central European stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 14(17), pages 1253-1268.
    17. Anatolyev, Stanislav, 2008. "A 10-year retrospective on the determinants of Russian stock returns," Research in International Business and Finance, Elsevier, vol. 22(1), pages 56-67, January.
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    Cited by:
    1. Demirer, Riza, 2013. "Can advanced markets help diversify risks in frontier stock markets? Evidence from Gulf Arab stock markets," Research in International Business and Finance, Elsevier, vol. 29(C), pages 77-98.
    2. Aloui, Riadh & Hammoudeh, Shawkat & Nguyen, Duc Khuong, 2013. "A time-varying copula approach to oil and stock market dependence: The case of transition economies," Energy Economics, Elsevier, vol. 39(C), pages 208-221.

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