What Level of Portfolio Disaggregation in Emerging Market Investments?

Abstract:     
Liberalization of capital markets in emerging markets during the last two decades has caused an increased responsiveness of these countries equity markets to world factors. What are the implications of globalization to international asset allocation? We find that global portfolio managers no longer can add significant value by pursuing indexing strategies in emerging markets. The empirical analysis shows that aggregate diversification across all emerging markets is no longer enough to create value. Country and stock selection strategies are imperative, if a global portfolio manager wants to outperform benchmarks.

Number of Pages in PDF File: 27

Keywords: Emerging markets, international diversification, indexing strategies

JEL Classification: F36, G11, G15

Accepted Paper Series