The cowboy and the frontier

Frontier markets prosper through offering uncertainty. But as Mr. Uncertainty prepares to occupy the White House, that might have less value.

The cowboy and the frontier

In 2011, a senior economist at the International Monetary Fund wrote a paper examining the role frontier markets should play in equity investors’ portfolios.

Jorge Chan-Lau used a risk parity model, which attempts to spread exposure in a portfolio according to volatility estimates rather than, say, market capitalisation. After weighing up the data, Chan-Lau concluded that frontier markets should get a much higher allocation in investors’ portfolios.

Chan-Lau repeated one usual argument...

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