RT Journal Article
SR Electronic
T1 Frontier Equity Markets: <em>Risk Parity Lessons for Asset Allocation</em>
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 28
OP 36
DO 10.3905/jai.2014.16.4.028
VO 16
IS 4
A1 Jorge A. Chan-Lau
YR 2014
UL https://pm-research.com/content/16/4/28.abstract
AB Are frontier markets the next emerging markets? And if so, should global equity investors include them in their portfolios? From a risk parity perspective, investors can benefit from a frontier markets allocation well in excess of the market weight of the asset class. A risk parity portfolio tends to outperform a market-cap-weighted portfolio during periods of positive equity returns, while delivering comparable returns during crisis periods. Historical data shows that even if portfolio managers cannot follow a risk parity asset allocation strategy due to benchmark tracking considerations, overweighting frontier markets can help them outperform their benchmarks during upside periods without increasing downside risks significantly.TOPICS: Frontier, security analysis and valuation, portfolio construction, performance measurement