Portfolio allocations in the Middle East and North Africa
نویسندگان
چکیده
We examine the issue of possible portfolio diversification benefits into seven Middle-Eastern and North African (MENA) stock markets. We take the standpoint of the world investor and we construct portfolios in international and local currencies based on five optimization models and two risk measures. We then compare the portfolio out-of-sample performance based on Sharpe and Sortino ratios through the Jobson-Korkie statistic. Our results highlight outstanding diversification benefits in the MENA region, both in dollar and local currencies. Portfolios based on local currencies seem to exhibit a higher degree of diversification, while the measure of risk seems to affect profitability less than the optimization model employed. Overall, we show that these under-estimated, under-investigated markets could attract more portfolio flows in the future. JEL classification: G11;G12;G15
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