小型新兴市场：一种新资产类别.docxVIP

SmallEmergingMarketsANewAssetClass

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1.Introduction

Internationaldiversificationhaslongbeencentraltoglobalportfolioconstruction.Intheearly1990s,emerging-market(EM)equitiesofferedexceptionalbenefits:lowcomovementwithdeveloped-market(DM)indicesandsizablerisk-adjustedreturns.ThesebenefitswereemphasizedbytheInternationalFinanceCorporation(IFC)inthe1980sinitspioneeringeffortsinestablishingtheemergingmarketassetclass(ErrunzaandvanAgtmael1982,Gill2012,vanAgtmael1987).Oversubsequentdecades,however,theveryliberalizationthatbroadenedaccesstoEMscompressedthesepremia.AsEMsenteredmajorbenchmarks,attractedforeigncapital,andintegratedmoredeeplywithadvancedmarkets,correlationswithDMssurged,approaching0.8bythemid-2000sandremainingelevatedsince(Figure1,PanelA).Atthesametime,therisk-adjustedreturnsthatcharacterizedthe1990sandmuchoftheearly2000slargelyvanishedinthe2010s–2020s(Figure1,PanelB).Thediversificationfrontierhasnarrowed,leavinginvestorswithfeweropportunitiestoobtainmeaningfulrisk-adjustedreturnsthroughinternationalallocation.

Thispaperaskswhetheranysegmentoftheglobalmarketportfolioremainssufficientlydistincttorecreatethediversificationandexcess-returnpotentialonceassociatedwithEMs.Weidentifysuchafrontieramonglow-andmiddle-incomecountries(LMICs)withrelativelysmallpopulationsorlandareas.Theideathat“SmallStates”behavedifferentlyiswellestablishedindevelopmentpolicy,wherecountrieswithfewerthan1.5millionpeopleareoftengroupedtogetherduetotheirstructuralvulnerabilities:concentratedproductionandexportbases,geographicisolation,highper-capitacostsofpublicserviceprovision,andheightenedexposuretonaturaldisastersandclimaterisk.Ouranalysisbuildsonthesameintuition,thatcountrysizeshapesbothresil