Testing for Mean‐Variance Spanning with Short Sales Constraints and Transaction Costs: The Case of Emerging Markets

Frans A. De Roon, Theo E. Nijman and Bas J. M. Werker

Journal of Finance, 2001, vol. 56, issue 2, 721-742

Abstract: We propose regression‐based tests for mean‐variance spanning in the case where investors face market frictions such as short sales constraints and transaction costs. We test whether U.S. investors can extend their efficient set by investing in emerging markets when accounting for such frictions. For the period after the major liberalizations in the emerging markets, we find strong evidence for diversification benefits when market frictions are excluded, but this evidence disappears when investors face short sales constraints or small transaction costs. Although simulations suggest that there is a possible small‐sample bias, this bias appears to be too small to affect our conclusions.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (115)

Downloads: (external link)
https://doi.org/10.1111/0022-1082.00343

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:56:y:2001:i:2:p:721-742

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().