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

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  • Marie Briere
  • 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.

Suggested Citation

  • Marie Briere & Ariane Szafarz, 2011. "Investment in Microfinance Equity: Risk, Return, and Diversification Benefits," Working Papers CEB 11-050, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/100398
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    References listed on IDEAS

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    2. 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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    More about this item

    Keywords

    Microfinance; portfolio management; equity; emerging markets.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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