Benefits of inernational portfolio diversification: implication of the middle eastern oil - producint

Over the last decades, International Portfolio Diversification (IPD) has been the integral feature of global capital markets. Using Dynamic Conditional Correlation (DCC) model, this paper investigates opportunities of the short-run IPD benefits by investing in the Middle Eastern oil-producing countries. In addition, for the long-run linkage analysis, Autoregressive Distributed Lag approach (ARDL) is applied. It is found that, the market returns of the sampled countries are not definitely correlated in the short and long-term. The results imply that international portfolio investors may get the short and long-term diversification benefits by diversifying their portfolios among the Middle Eastern equity markets.JEL codes: G11, G15, C22

Keywords:

International portfolio diversification , Co-integration , Middle East oil-producing countries , ARDL , DCC GARCH