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Portfolio allocations in the Middle East and North Africa

Thomas Lagoarde-Segot and Brian Lucey ()

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: We 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.

Keywords: Portfolio Allocation; Emerging Markets; Middle East and North Africa. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-fin, nep-fmk and nep-rmg
Date: 2006-05-25
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