Abstract
Emerging market bonds improve the efficient frontier of a mixed-asset portfolio. The improvement is based on the application of mean-variance spanning tests on returns that are free from survivorship bias. The results indicate that emerging market bonds span a portfolio comprised of U.S. stocks, U.S. bonds, international equity, and international bonds from developed markets. Mean-variance optimizations suggest that a typical fund sponsor might consider overweighting its allocation towards emerging market bonds.
TOPICS: Emerging markets, fixed income portfolio management, portfolio construction
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