Does inter-region portfolio diversification pay more than the international diversification?
Date
2022
Authors
Ahmad, N.
Rehman, M.U.
Vo, X.V.
Kang, S.H.
Editors
Advisors
Journal Title
Journal ISSN
Volume Title
Type:
Journal article
Citation
Quarterly Review of Economics and Finance, 2022; 83:26-35
Statement of Responsibility
Conference Name
Abstract
Recent literature supports the view that returns of most of the international equity markets are significantly integrated. However, diversification based across different regions remains a focus of attention for the investment community. We examine the presence of returns integration among BRICS, Latin American, and emerging and frontier Asian equity markets by utilizing panel co-integration and panel regression, i.e., fully modified ordinary least square (FMOLS), to examine portfolio diversification opportunities. Our sampling of data comprises of daily stock return from 1st September 1997 to 30th November 2018. Our findings highlight that within the region, portfolio diversification does not provide optimal returns. Furthermore, empirical results from the vector error correction model (VECM) suggest the benefits of portfolio diversification in the short-run. In particular, not all equity markets are significantly linked with gold, oil, and forex markets. Our empirical analysis reveals that within the region, equity-commodity portfolios may lead to greater diversification gains.
School/Discipline
Dissertation Note
Provenance
Description
Access Status
Rights
Copyright 2021 Board of Trustees of the University of Illinois