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Do Portfolio Diversification Benefits Exist? A Study of Selected Developed and Emerging Markets

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  2. Economics, Finance, Business & Management
  3. Applied Economics Quarterly
  4. Vol. 67, Issue 2
  5. pp. 177–198

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Patel, R. Do Portfolio Diversification Benefits Exist? A Study of Selected Developed and Emerging Markets. Applied Economics Quarterly, 67(2), 177-198. https://doi.org/10.3790/aeq.67.2.177
Patel, Ritesh "Do Portfolio Diversification Benefits Exist? A Study of Selected Developed and Emerging Markets" Applied Economics Quarterly 67.2, 2021, 177-198. https://doi.org/10.3790/aeq.67.2.177
Patel, Ritesh (2021): Do Portfolio Diversification Benefits Exist? A Study of Selected Developed and Emerging Markets, in: Applied Economics Quarterly, vol. 67, iss. 2, 177-198, [online] https://doi.org/10.3790/aeq.67.2.177
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Do Portfolio Diversification Benefits Exist? A Study of Selected Developed and Emerging Markets

Patel, Ritesh

Applied Economics Quarterly, Vol. 67 (2021), Iss. 2 : pp. 177–198

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/aeq.67.2.177
Language
English
Pages
22
Keywords

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€ 26.00 (incl. local VAT if applicable)

Author Details

Ritesh Patel, Assistant Professor, Economics and Finance Area, Institute of Management, Nirma University, S G Highway, Ahmedabad, Gujarat, India.

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Abstract

The objective of the study is to 1) examine the existence of portfolio diversification opportunities and 2) measure the diversification benefits. The study is performed on 14 markets (seven developed and seven emerging markets) covering a period from January 2010 to December 2020. The study is performed on E7 emerging markets (Brazil, China, India, Indonesia, Mexico, Russia and Turkey) and G7 developed markets (Canada, France, Germany, Italy, Japan, UK and USA). The results of correlation, Granger causality, and cointegration tests reveals the lack of short-term and long-term integration among the markets and existence of portfolio diversification opportunities. The study examines portfolio diversification opportunities by comparing non-diversified portfolios (home market) with diversified portfolios (equal weighted portfolios, minimum variance portfolios, and maximum Sharpe portfolio). Investors from developed markets can gain better returns, lower risk, and a higher Sharpe ratio with portfolio diversification in emerging markets. Investors have a significant reduction in their portfolio risk and an increase in their Sharpe ratio with investment diversification.

Table of Contents

Section Title Page Action Price
Ritesh Patel: Do Portfolio Diversification Benefits Exist? A Study of Selected Developed and Emerging Markets 177
Abstract 177
1. Introduction 177
2. Literature Review 179
3. Empirical Framework 180
4. Empirical Findings 183
4.1 Market Integration Analysis 183
4.1.1 Descriptive Statistics 183
4.1.2 Correlation 183
4.1.3 Unit Root Test 177
4.1.4 Granger Causality Test 177
4.1.5 Cointegration Analysis 177
4.2 Portfolio Diversification Benefits 177
4.3 Gains from International Diversification 177
5. Conclusion 177
References 177

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