Diversification Benefits of Emerging Markets Subject to Portfolio Constraints
Working Paper No. UBCFIN99-5
24 Pages Posted: 23 Jun 2001
There are 2 versions of this paper
Diversification Benefits of Emerging Markets Subject to Portfolio Constraints
Diversification Benefits of Emerging Markets Subject to Portfolio Constraints
Abstract
This paper examines the international diversification benefits subject to portfolio constraints --- in particular, constraints on short selling. We show 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 non-native 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.
Keywords: International diversification, short-sale constraints, home bias, asset allocation, Bayesian inference
JEL Classification: G11, G15, C11, C15
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Time-Varying World Market Integration
By Geert Bekaert and Campbell R. Harvey
-
Time-Varying World Market Integration
By Geert Bekaert and Campbell R. Harvey
-
Foreign Speculators and Emerging Equity Markets
By Geert Bekaert and Campbell R. Harvey
-
Foreign Speculators and Emerging Equity Markets
By Geert Bekaert and Campbell R. Harvey
-
The World Price of Foreign Exchange Risk
By Bernard Dumas and Bruno Solnik
-
Emerging Equity Market Volatility
By Geert Bekaert and Campbell R. Harvey
-
Emerging Equity Market Volatility
By Geert Bekaert and Campbell R. Harvey
-
Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets
By Geert Bekaert and Robert J. Hodrick