Title: Diversification into other emerging nations: evidence from India

Authors: Rakesh Gupta; Nupur Pavan Bang

Addresses: Griffith Business School, Griffith University, 170 Kessels Road, Nathan, Brisbane, QLD 4111, Australia ' Centre for Investment, Indian School of Business, Gachibowli, Hyderabad, 500032, India

Abstract: Market integration has been increasing over time. The benefits of international diversification are limited in an environment of markets moving together. In this study, we look at the diversification benefits to an Indian investor if they invest a part of their money into other emerging nations and the USA. Using the asymmetric dynamic conditional correlation GARCH model, to estimate time-varying correlations, we find that international diversification provides better risk adjusted returns to the investors. However, the use of conditional correlations does not give better results than the unconditional correlations.

Keywords: Indian investors; emerging markets; equities; time varying correlations; ADCC GARCH models; international diversification; India; market integration; USA; United States; risk adjusted returns; risk adjustment.

DOI: 10.1504/IJBG.2015.070220

International Journal of Business and Globalisation, 2015 Vol.15 No.1, pp.1 - 19

Received: 25 Mar 2014
Accepted: 21 Nov 2014
Published online: 29 Jun 2015 *

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