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  • Looking at new markets for international diversification: frontier markets

    File version
    Accepted Manuscript (AM)
    Author(s)
    Sukumaran, Aswini
    Gupta, Rakesh
    Jithendranathan, Thadavilil
    Griffith University Author(s)
    Gupta, Rakesh
    Year published
    2015
    Metadata
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    Abstract
    Purpose – The purpose of this paper is to examine whether there exist significant benefits from diversification into frontier markets for an Australian investor in comparison to a US investor. Design/methodology/approach – The study uses the computationally efficient ADCC GARCH model to estimate time-varying correlations of returns. The authors also compare the results to DCC GARCH correlations in order to test whether the results are model-specific. Optimal portfolios with several restrictions were constructed and the results from Australian and US investors were compared. The study also uses a holding out period that ...
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    Purpose – The purpose of this paper is to examine whether there exist significant benefits from diversification into frontier markets for an Australian investor in comparison to a US investor. Design/methodology/approach – The study uses the computationally efficient ADCC GARCH model to estimate time-varying correlations of returns. The authors also compare the results to DCC GARCH correlations in order to test whether the results are model-specific. Optimal portfolios with several restrictions were constructed and the results from Australian and US investors were compared. The study also uses a holding out period that is rebalanced at the end of each quarter using new portfolio weights. Findings – The study finds that there are significant benefits for the Australian investor from diversifying into frontier markets. However, the benefits to the US investor are much higher than that of an Australian investor. The results from the holding out period also present significantly higher benefits to the US investor compared to the Australian investor. Originality/value – This study examines the diversification benefits to the Australian investor from frontier markets and compares the benefits of the Australian and the US investors. The results emphasise the potential benefits from including frontier markets in the portfolio. The paper also presents a holding out period analysis. Keywords Australia, USA, Frontier markets, International diversification, Time-varying correlations Paper type Research paper
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    Journal Title
    International Journal of Managerial Finance
    Volume
    11
    Issue
    1
    DOI
    https://doi.org/10.1108/IJMF-05-2013-0057
    Subject
    Accounting, auditing and accountability
    Banking, finance and investment
    Banking, finance and investment not elsewhere classified
    Publication URI
    http://hdl.handle.net/10072/141030
    Collection
    • Journal articles

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