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

Author

Listed:
  • Seema Narayan

    (RMIT University)

  • Mobeen Ur Rehman

    (Shaheed Zulfikar Ali Bhutto Institute of Science and Technology)

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.

Suggested Citation

  • Seema Narayan & Mobeen Ur Rehman, 2018. "Portfolio Diversification Opportunities Within Emerging and Frontier Stock Markets: Evidence from Ten Asian Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(1), pages 1-22, July.
    • Handle: RePEc:idn:journl:v:21:y:2018:i:1:p:1-22
    DOI: https://doi.org/10.21098/bemp.v21i1.893
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    Citations

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    Cited by:

    1. Ahmad, Nasir & Rehman, Mobeen Ur & Vo, Xuan Vinh & Kang, Sang Hoon, 2022. "Does inter-region portfolio diversification pay more than the international diversification?," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 26-35.
    2. Rehman, Mobeen Ur, 2019. "Energy shocks pricing model: A non-linear US sectoral based analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    3. Narayan, Seema & Rehman, Mobeen Ur, 2021. "Can home-biased investors diversify interregionally in the long run?," Economic Modelling, Elsevier, vol. 97(C), pages 167-181.
    4. Rehman, Mobeen Ur & Vo, Xuan Vinh, 2020. "Do alternative energy markets provide optimal alternative investment opportunities?," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    5. Seema Wati Narayan & Mobeen Ur Rehman & Yi-Shuai Ren & Chaoqun Ma, 2023. "Is a correlation-based investment strategy beneficial for long-term international portfolio investors?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-26, December.
    6. Narayan, Seema & Ur Rehman, Mobeen, 2020. "International portfolio strategies and opportunities: The case of the US, Japan and Asia," Finance Research Letters, Elsevier, vol. 37(C).
    7. Seema Wati Narayan, 2020. "Asian Current Account Balances And Spillovers From A Foreign Country, A Region And The United States," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(1), pages 1-24, April.

    More about this item

    Keywords

    Co-integration; VECM; Emerging Markets; Asia;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F3 - International Economics - - International Finance
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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