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Investment in Microfinance Equity: Risk, Return, and Diversification Benefits

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  • Marie Brière
  • Ariane Szafarz

Abstract

This paper draws a global picture of worldwide microfinance equity. Taking full advantage of daily quoted prices of microfinance stocks from their issuance, we construct microfinance country equity indices and an international global microfinance index. We analyze changes in these indices, assessed in reference to comparable indices for the financial sector and also to national indices. Our findings show that microfinance has been closely correlated with the financial sector since 2003. In terms of risk exposure, estimates of the Capital Asset Pricing Model demonstrate that microfinance shares exhibit higher market beta than those of conventional financial institutions and have equivalent currency exposure.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 11-050.

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Length: 31 p.
Date of creation: Oct 2011
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/100398

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Keywords: Microfinance; portfolio management; equity; emerging markets.;

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References

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  1. Thorsten Beck & Asli Demirgüç-Kunt & Maria Soledad Martinez Peria, 2008. "Banking Services for Everyone? Barriers to Bank Access and Use around the World," World Bank Economic Review, World Bank Group, vol. 22(3), pages 397-430, November.
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  11. Szafarz, Ariane & Brière, Marie, 2008. "Crisis-Robust Bond Portfolios," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/7748, Université Paris-Dauphine.
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  17. Wagner, Charlotte, 2010. "From boom to bust: how different has microfinance been from traditional banking?," Frankfurt School - Working Paper Series 156, Frankfurt School of Finance and Management.
  18. Gabriel Di Bella, 2011. "The Impact of the Global Financial Crisis on Microfinance and Policy Implications," IMF Working Papers 11/175, International Monetary Fund.
  19. Marie Brière & Alexandre Burgues & Ombretta Signori, 2008. "Volatility Exposure for Strategic Asset Allocation," Working Papers CEB 08-034.RS, ULB -- Universite Libre de Bruxelles.
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  21. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, vol. 35(10), pages 1721-1738, October.
  22. Roon, F.A. de & Nijman, T.E. & Werker, B.J.M., 1998. "Testing for mean-variance spanning with short sales constraints and transaction costs: The case of emerging markets," Discussion Paper 1998-07, Tilburg University, Center for Economic Research.
  23. Arvind Ashta & Marek Hudon, 2009. "To whom should we be fair? Ethical issues in Balancing Stakeholder Interests from Banco Compartamos Case Study," Working Papers CEB 09-036.RS, ULB -- Universite Libre de Bruxelles.
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Cited by:
  1. Moulin, Bertrand, 2011. "Microfinance investment vehicles in Sub-Saharan Africa: constraints and potentials," MPRA Paper 32967, University Library of Munich, Germany.

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