n African Finance Journal - Do frontier market equities have a role to play in a diversified international equity portfolio?
|Article Title||Do frontier market equities have a role to play in a diversified international equity portfolio?|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Author||Chandan Prayag, David Du Toit, Kristin Kenmuir, Alastair Morrison and Chimwala Tembo|
|Publication Date||Jan 2010|
|Pages||75 - 97|
|Issue||Special issue 1|
|Keyword(s)||Correlations, Diversification, Efficient frontiers, Frontier markets, G10, G11 and G15|
This study investigates the impact of including frontier market equities in a diversified equity portfolio consisting of emerging and developed markets equities. It is found that while emerging market equity indices have been highly correlated with those of developed markets, correlations between the investable frontier market indices and both the emerging and the developed market indices have been significantly lower. The paper shows that the inclusion of equities from frontier markets in an internationally diversified equity portfolio is significantly advantageous, leading to portfolios with superior risk-return characteristics. However, both, the choice of the frontier market index and of the period of study affect the results.
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