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The Exploration of Diversification Benefits of Emerging Markets
Pohler, Hannah
Pohler, Hannah
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Date
2014
Additional date(s)
2014-05-01
Abstract
This paper explores whether American investors receive greater diversification gains through portfolios comprising solely of emerging market securities, United States securities, or a portfolio combining emerging market and United States securities. According to popular thought, emerging markets provide international diversification benefits to United States investors through their high returns, high volatilities, and low correlations to developed markets. This popular school of thought is highly debated due to the globalization of world markets and trade liberalization of emerging markets. Additionally, the United States investors face investment barriers and additional risks, such as political and currency risk. As emerging markets mature and develop, United States investors may not receive sufficient diversification gains from holding emerging market securities. This paper will assess the risk-to-return profiles of three different portfolio strategies and analyze the trends in correlation between world financial markets.
Contents
Subject
Diversification Benefits
Emerging Markets
Emerging Markets
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Research Projects
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Description
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Department
Finance