EMERGING MARKETS: WHERE IS THE BENEFIT OF DIVERSIFICA TION?

Abstract

A number ofstudies provide evidence that diversifying into emerging equity markets provides benefits to portfolio investors. Our findi,ngs, however, document that such benefits are not present for all emerging markets across time. We show that adding emerging market equities to the reference U S portfolio in one subperiod slightly improves the portfolio performance, but it worsens it in other subperiods. This study suggests that different time frames are likely to yield different outcome when diversifying into emerging markets