Chapter 9

The Portfolio Diversification Benefits of Frontier Markets: An Investigation Into Regional Effects

P. Andrikopoulos*
J. Niklewski**
T. Rodgers***    Coventry Business School, Coventry, United Kingdom**    Coventry Business School, Coventry University, Coventry, United Kingdom

Abstract

This chapter explores the differences in diversification benefits attributable to individual regional frontier markets. We estimate time-varying correlations using a DCC–MGARCH–based copula model and examine the risk–return relationship using a modified value at risk approach that takes into account nonnormality in returns. We identify frontier Africa as producing the greatest diversification benefits to an international investor and frontier Europe as providing ...

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