Conditional Asset Allocation in Emerging Markets
Campbell R. Harvey
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative
NBER Working Paper No. w4623
Within the context of conditional asset allocation strategies, this paper explores the implications of the low correlations of the emerging market returns with developed market returns and the relatively high degree predictability of emerging countries' returns. It is well known that low correlations improve investment opportunities and my research provides out-of-sample validation of the improved performance. However, the most dramatic enhancement is generated by the use of conditioning information. Portfolio strategies that use conditioning information to predict emerging market returns produce impressive out-of-sample performance over the 1980-1992 period.
Number of Pages in PDF File: 48
Date posted: August 1, 2000