Portfolio allocations in the Middle East and North Africa
AbstractWe examine the issue of possible portfolio diversification benefits into seven Middle-Eastern and North African (MENA) stock markets. We construct international portfolios in dollars and local currencies. We compute the ex-ante weights by plugging five optimization models and two risk measures into a rolling block-bootstrap methodology. This allows us to derive 48 monthly rebalanced ex-post portfolio returns. We analyze the out-of-sample performance based on Sharpe and Sortino ratios and the Jobson-Korkie statistic. Our results highlight outstanding diversification benefits in the MENA region, both in dollar and local currencies. Overall, we show that these under-estimated, under-investigated markets could attract more portfolio flows in the future.
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Bibliographic InfoPaper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp141.
Date of creation: 25 May 2006
Date of revision:
Portfolio Allocation; Emerging Markets; Middle East and North Africa.;
This paper has been announced in the following NEP Reports:
- NEP-AFR-2006-05-27 (Africa)
- NEP-ALL-2006-05-27 (All new papers)
- NEP-FIN-2006-05-27 (Finance)
- NEP-FMK-2006-05-27 (Financial Markets)
- NEP-RMG-2006-05-27 (Risk Management)
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