The Best Market Mixtures for Portfolio Diversification across Markets

Choosing the right market mixtures is important for deriving maximum outcome from international diversification. Our research indentified a mixture of emerging and developed markets would provide the maximum diversification benefits for developed market investors based on reward to risk ratio. In addition, domestic frontier market investors should diversify outside the frontier markets to get maximum risk adjusted return. Surprisingly, emerging market investors should include emerging markets only in their portfolio as diversification outside emerging markets would not yield any benefit for the investor group.