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Two-Stage Asset Allocation with Data Envelopment Analysis: The Case of Emerging Markets

Author

Listed:
  • José Luis Miralles-Quiros

    (Department of Financial Economics, University of Extremadura, Badajoz, Spain)

  • María Mar Miralles-Quiros

    (Department of Financial Economics, University of Extremadura, Badajoz, Spain)

  • Jose Manuel Nogueira

    (Department of Financial Economics, Polytechnic Institute of Tomar, Portugal)

Abstract

Emerging countries have experienced significant geopolitical, economic and demographic changes in recent years. These changes have led investors to doubt the merits of investing in them or not. This study examines different rules of portfolio construction using exchange-traded funds from eighteen emerging markets and employs Data Envelopment Analysis to select the efficient ones. We show that portfolios created using this method clearly outperform equally weighted portfolios and also those built using classical portfolio optimization approaches.

Suggested Citation

  • José Luis Miralles-Quiros & María Mar Miralles-Quiros & Jose Manuel Nogueira, 2020. "Two-Stage Asset Allocation with Data Envelopment Analysis: The Case of Emerging Markets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(5), pages 386-406, November.
    • Handle: RePEc:fau:fauart:v:70:y:2020:i:5:p:386-406
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1470
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    More about this item

    Keywords

    Data Envelopment Analysis; emerging markets; exchange-traded funds; portfolio optimization; performance;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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