Diversification Benefits of Emerging Markets Subject to Portfolio Constraints

Topics:
Investment and Capital Markets
Tags:
Benefit,
Emerging Market,
Equity,
Finance,
Financial Services,
Investment,
NeoKinetic Systems
Source:
NeoKinetic Systems

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Overview: This paper examines the international diversification benefits subject to portfolio constraints - in particular, constraints on short selling. It shows that the international diversification benefits remain substantial for U.S. equity investors when they are prohibited from short selling in emerging markets. This result is robust to investment restrictions on nonnative individuals. It is also unaffected by the fact that the U.S. equity index portfolio is not on the efficient frontier spanned by U.S. securities. The integration of world equity markets reduces, but does not eliminate, the diversification benefits of investing in emerging markets subject to short-sale constraints.

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Format: PDF | Size: 204KB | Date: Feb 2003 | Pages: 24

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