The Best of Both Worlds: Accessing Emerging Economies via Developed Markets

• 成果类型: Article
• 署名作者: Bae, Joon Woo; Elkamhi, Redouane; Simutin, Mikhail
• 署名单位: University System of Ohio; Case Western Reserve University; University of Toronto
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12817
• 发表日期: 2019
• 页码: 2579-2617
• 关键词: international diversification; stock returns; industrial-structure; Expected returns; gains; RISK; heteroskedasticity; transmission; portfolios; BORDERS

摘要

A growing body of evidence suggests that the benefits of international diversification via developed markets have declined dramatically. While emerging markets still offer diversification opportunities, their public equity indices capture only a fraction of emerging countries' economic activity. We propose a diversification approach that exploits the global connectedness of developed countries to gain exposure to emerging countries' overall economies rather than their shallow equity markets. In doing so, we demonstrate that developed markets still offer substantial diversification benefits beyond those available through equity indices. Our results suggest that relying on equity indices to assess diversification benefits understates diversification gains.