THE RISK-RETURN TRADE-OFF OF INVESTING IN LATIN AMERICAN EMERGING STOCK MARKETS

Rishma Vedd and Paul Lazarony

Accounting & Taxation, 2014, vol. 6, issue 1, 93-104

Abstract: In this paper we examine risk-return trade-off of investing in Latin American emerging stock markets. In particular, the study seeks to examine whether equities from Latin American emerging markets might have offered the Canadian investor high returns for a relatively low level of risk when combined into a portfolio of Canadian shares. Optimal portfolios were derived based on historic (ex-post) observations and evaluated utilizing the mean return per unit of risk (MRPUR) performance measure. In particular, the performance of the MRPUR-optimal emerging market portfolio was compared with the MRPUR of a portfolio consisting solely of Canadian shares to determine whether any benefits resulted from diversifying into the emerging stock markets over the ten-year periods. The results revealed substantial differences in the risk-return characteristics of the MRPUR-optimal portfolios.

Keywords: Emerging Stock Market; Optimal Portfolio; Risk-Return Characteristics; Equity Portfolio; Portfolio Diversification (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2014
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