1 / 29

Global Portfolio Diversification: A South African Perspective

Global Portfolio Diversification: A South African Perspective. Mike Ward* Chris Muller. *Gordon Institute of Business Science, University of Pretoria, South Africa mchlwrd@gmail.com. Global Diversification. Return. Global efficient frontier. Local efficient frontier. Risk.

edda
Download Presentation

Global Portfolio Diversification: A South African Perspective

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Global Portfolio Diversification:A South African Perspective Mike Ward* Chris Muller *Gordon Institute of Business Science, University of Pretoria, South Africa mchlwrd@gmail.com

  2. Global Diversification Return Global efficient frontier Local efficient frontier Risk

  3. Rank best performers in ZAR 1994-2008 • USA • China • Russia • South Africa • Ireland • Czech Republic • UK • Columbia • Brazil

  4. Research questions • Where in the world should South African investors have invested? • Ex post, perfect information • No exchange controls • Ex ante can one out-perform? • Is there weak-form efficiency in global markets?

  5. Outline of Research Method • Part One (US perspective) • Identify countries which under/over perform • Ex-post • Use the MSCI country total return indices • Convert to USD • Single “Lump-sum” investment at start • Constant value annuity investment each month

  6. Outline of Research Method • Repeat from a South African perspective in ZAR • Part Two (SA Perspective) • Construct Markowitz portfolios • Optimise Markowitz portfolios • Optimal look-back period for co-variance matrix • Optimal look-back period for forecast returns • Optimal re-balancing/holding period for ex-ante

  7. The Data • MSCI TRI country data, monthly, 1969-2008 • USA study used 18 countries from 1970 • SA study used 50 countries from 1994 and included countries as they became available • Use an equally weighted portfolio of ‘available countries’ as benchmark

  8. Results Part One USA Single lump-sum investment

  9. Results USA Monthly Constant Value Annuity

  10. Part Two South African Perspective Lump-sum investment 1994-2008 n=50 countries

  11. Results South African Perspective Monthly Constant Value Annuity

  12. Results South African Perspective Markowitz portfolios

  13. Optimal Portfolio Construction • Start Jan 1975 • Countries that ‘exist’ over previous 5 years • Covariance matrix of past 60 month returns • Use previous 6 months to forecast returns • Use Solver to maximise Sharpe ratio • Weight > zero • Weight <= 20% • Sum(Weight) = 1.0 • Re-optimise portfolio annually, use for next year Select optimal portfolio

  14. South Africa Weights

  15. Summary Results

  16. Concluding thoughts… • Investors should take a global perspective • We do find weak-form in-efficiency • The JSE doesn’t feature • These results could be improved by optimising the look-back and holding period

More Related