Efficient Market Frontiers for the Emerging Economies of China and India

摘要

This study constructs efficient portfolio frontiers for China and India, using a disaggregate approach that looks closely at sectoral diversification. Each market portfolio is made up of different sectors of the economy and the sector returns are based on market capitalization weighted sector closing prices from January 1993 to November 2004. The results indicate that a portfolio of all the sectors is optimal relative to one that consists of only a subset of the three largest sectors. Also, the efficient frontiers for India are shown to consistently envelope the ones for China, regardless of the risk measure employed.