Institutional investors usually employ mean-variance analysis to determine optimal portfolio weights. Almost immediately upon implementation, however, the portfolio's weights become sub-optimal as changes in asset prices cause the portfolio to drift away from the optimal targets. In an idealized...

Institutional investors usually employ mean-variance analysis to determine optimal portfolio weights. Almost immediately upon implementation, however, the portfolio's weights become sub-optimal as changes in asset prices cause the portfolio to drift away from the optimal targets. We apply a...

Should investors in emerging markets focus on diversifying across countries or diversifying across industries? This question, widely debated in developed markets, and particularly in Europe, has received little attention in emerging markets. Using a normative approach that disentangles the...

Should investors in emerging markets focus on diversifying across countries or diversifying across industries? This question, widely debated in developed markets, and particularly in Europe, has received little attention in emerging markets. Using a normative approach that disentangles the...

Beta, as measured by the Capital Asset Pricing Model (CAPM), is widely used for pricing stocks, determining the cost of capital, and gauging the extent to which markets are integrated. The CAPM model assumes that equilibrium conditions prevail. The choice of which market portfolio to use in the...