هزینه های معاملات مرزی بازار و تنوع بخشی

Frontier markets, sometimes referred to as “emerging emerging markets,” have high transaction costs so investors who rebalance their portfolios monthly do not receive diversification benefits. Rebalancing every three months or longer, however, leads to diversification gains. Diversification benefits are larger in time periods with lower transaction costs and this is linked to risk aversion. Higher risk aversion results in larger transaction costs and larger return correlations between the United States and frontier markets. There is no cross-country relation between diversification benefits and transaction costs or development. Our results are based on comprehensive measures of transaction costs for 19 frontier markets.