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.

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 made in favour of frontier investing the benefits of diversification these markets offer. But he also said a strategy of “overweighting frontier markets could help portfolios outperform when global equity prices are rising”.

...

¬ Haymarket Media Limited. All rights reserved.

FinanceAsia has updated its subscription model.

Registered readers now have the opportunity to read 5 articles from our award-winning website for free.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team subscription (2-5 users), or office-wide licences.

To help you and your colleagues access our proprietary content, please contact us at subscriptions@financeasia.com, or +(852) 2122 5222

Article limit is reached.

Hello! You have used up all of your free articles on FinanceAsia.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team subscription (2-5 users), or office-wide licences. To help you and your colleagues access our proprietary content, please contact us at subscriptions@financeasia.com, or +(852) 2122 5222