Oops, we should have diversified!

Jayasuriya, Shamila A.; Shambora, William

doi:10.1080/09603100903035947

Cited by 31 publications

(9 citation statements)

References 7 publications

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“…Study suggests that recent global financial crisis has significantly increased the comovements and also found that the comovements are stronger for lower frequencies. Similarly, Jayasuriya and Shambora (2009) document that frontier equity markets offer considerable diversification benefits. Authors empirically showed that the diversified portfolio into frontier markets improved the risk and return trade off.…”

Section: Introductionmentioning

confidence: 99%

Dynamic analysis of time-varying correlations and cointegration relationship between Australia and frontier equity markets

Paramati

Gupta

Tandon

2016

IJBEM

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This paper aims to demonstrate to what extent Australian stock market is correlated with those of eighteen frontier markets of five different regions. We also investigate the long-run relationship between these markets. Empirical results of AGDCC GARCH model reveal that the correlations of Australian stock market with those of frontier markets are changing over time. Results show that Australia has weak correlations with all the frontier markets that are considered in this study. Further, our analysis confirms that the effects of the GFC on correlations of Australia and frontier markets are limited to only few frontier markets where correlations are slightly increased. The cointegration test results display that there is no evidence of long-run relationship between Australia and frontier markets. Similarly, Granger causality test results show that Australian stock market drives some of frontier markets and no evidence of reverse causality from these markets to Australia. Empirical findings of our study suggest that Australian stock market is weakly correlated with those of frontier markets. Therefore, our study findings suggest that the Australian investors can diversify their portfolios into these frontier markets for gaining higher risk-adjusted returns. Our study also contributes to the body of knowledge by addressing the issue of stock market linkages between developed and frontier markets and also the GFC.

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Section: Introductionmentioning

confidence: 99%

Dynamic analysis of time-varying correlations and cointegration relationship between Australia and frontier equity markets

Paramati

Gupta

Tandon

2016

IJBEM

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“…So, the reaction to deviations from the long-run trend is quite slow indicating that frontier markets act as good source of diversification opportunities despite a substantial degree of integration. Jayasuriya and Shambora (2009) highlighted improved portfolio risk and returns when investors diversify their portfolio into six frontier markets. Moreover, by making use of Principal Component Analysis (PCA), Berger, Pukthuanthong and Jimmy Yang (2011) reported that the frontier markets have low integration with the world market thereby offering significant diversification benefits.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Co-movement among US, Frontier and BRIC Equity Markets after the Financial Crisis

Singh

2017

Global Business Review

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The study attempts to capture static (long-run) as well as short-run time-varying co-movement among the US, frontier and Brazil, Russia, India and China (BRIC) equity markets (Morgan Stanley Capital International (MSCI) indices) in a multivariate framework after the recent global financial crisis, that is, during the easy money policy regime adopted by the emerged nations. The study employs Johansen cointegration and VAR ( p) ADCC-MVGARCH (1,1) models ranging from August 2010 to August 2015. Apart from this, efficient tests of causality inspired from Hill (2007, Journal of Applied Econometrics, 22(4), 747–765) are also employed to account for dynamic interactions between the co-movement coefficients. The Johansen cointegration model does not support the existence of a stochastic trend among the variables. However, asymmetric dynamic conditional correlation-multivariate generalized autoregressive conditional heteroskedastic model (ADCC-MVGARCH (1,1) model) results indicate time-varying co-movement among the underlying stock markets. The highest level of co-movement has been observed between the US and BRIC equity markets. On the other hand, co-movement between the US and frontier markets is found to be the lowest among others. On an average, 1-dollar long position in the US equity market should be shorted by 0.52 and 0.48 cents in the frontier and BRIC equity markets, respectively, across the sample time period. The efficient causality tests report indirect impact of co-movement between the US-frontier markets on the BRIC-frontier markets’ co-movement. The results critically support construction of a portfolio comprising stocks from the US, frontier and BRIC equity markets considering long-run and short-run co-movement among the variables.

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“…Cheng et al (2009) show investment in nine North African and Middle Eastern markets result in diversification gains to investors with global market exposure. Jayasuriya and Shambora (2009) find that U.S. investors would have earned higher risk-adjusted returns if they had invested in five frontier markets, while Speidell and Krohne (2007) show frontier markets have lower correlations with the U.S. equity market (S&P 500) than emerging markets. Frontier market research in other areas includes de Groot et al (2010) who show value and momentum effects prevail in frontier markets.…”

Section: Introductionmentioning

confidence: 97%