Portfolio Diversification Opportunities Within Emerging and Frontier Stock Markets: Evidence from Ten Asian Countries

Seema Narayan () and Mobeen Ur Rehman ()
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Mobeen Ur Rehman: Shaheed Zulfikar Ali Bhutto Institute of Science and Technology

Bulletin of Monetary Economics and Banking, 2018, vol. 21, issue 1, 1-22

Abstract: In this paper, we take the case of Asian investors in any one out of ten Emerging and Frontier Asian (EFA) nations with an investment portfolio comprising of the MSCI of the home country, MSCIs of nine other Asian countries and stock market index of a developed nation. We examine their portfolio diversification opportunities for the period 2000 to 2013 after conditioning for oil price movements and global investor sentiments. Our empirical analyses imply significant opportunities to diversify within Asia. In particular, not all stock markets show a stable long run relationship. The unconditional correlations in the short run and conditioned regression linkages from VECMs are weak and mainly insignificant.Diversificationopportunities for investors in some Asian nations improve after hedging for exchange rate movements. Further, we find that the portfolio examined here may lead to greater diversification gains than a portfolio without the nine other Asian countries.

Keywords: Co-integration; VECM; Emerging Markets; Asia (search for similar items in EconPapers)
JEL-codes: F3 F65 G11 G15 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:21:y:2018:i:1:p:1-22

DOI: 10.21098/bemp.v21i1.893

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