Portfolio optimization at the frontier: Assessing the diversification benefits of African securities
Working Papers from University of Antwerp, Faculty of Business and Economics
This study investigates the diversification benefits of African securities in comparison with other international investment opportunity sets from the perspective of a US investor. Using data from the most representative S&P Dow Jones traded indices of the US, other developed, emerging and African markets for the period of July 2014 - September 2018, I assess the benefits of diversification over these markets using the traditional and step-down tests of mean-variance spanning, and test the results' robustness by deviating from the normality assumption. My results show that, unlike their peers, African investment opportunity sets offer statistically significant diversification benefits to the benchmark US domestically-diversified minimum-variance and tangency portfolio. More specifically, I find that the "All Africa" set contributes to risk profile of the benchmark set while the "Africa ex-SA" is the only set offering significant improvements to this benchmark's tangency portfolio. These results bring additional evidence to the observation that countries with higher country-risk offer greater potential benefits of global diversification, which justifies to a significant extent the ongoing high appetite of international investors for African securities.
Keywords: International diversification; Mean-Variance Spanning; Frontier markets; Africa (search for similar items in EconPapers)
JEL-codes: G11 G15 C46 (search for similar items in EconPapers)
Pages: 25 pages
New Economics Papers: this item is included in nep-afr
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2019001
Access Statistics for this paper
More papers in Working Papers from University of Antwerp, Faculty of Business and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Joeri Nys ().