小型新兴市场：一种新的资产类别

Policy Research Working Paper Small Emerging Markets A New Asset Class Alvaro PedrazaDilip Ratha A verified reproducibility package for this paper isavailable athttp://reproducibility.worldbank.org,clickherefor direct access. Policy Research Working Paper11307 Abstract This paper examines whether small low- and middle-in-come countries offer excess returns and diversificationbenefits to global investors. Using monthly equity pricedata from 2015–25, the study pools listed stocks fromlow- and middle-income countries whose populationsfall below a given threshold and construct value-weightedportfolios, sorted by population and land area. It thenestimates a two-factor asset-pricing model to evaluatetheir risk-adjusted performance relative to developed- and to 20 million population range. Once larger low- andmiddle-income countries enter the portfolio, integrationwith global markets rises sharply, alphas converge to zero,and diversification benefits vanish. No analogous patternappears among high-income countries, where even verysmall markets are fully integrated. These results point to a“small emerging market asset class”: small developing econ-omies remain partially segmented, combining exposure toundiversifiable country-specific risks stemming from struc- The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about developmentissues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry thenames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely thoseof the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and Small Emerging Markets: A New Asset Class Alvaro Pedraza2 Dilip Ratha3 JEL Codes:G11, G15, F21, O16Keywords:Small States, Emerging Markets, International Diversification, Financial Integration, Excess Returns 1.Introduction International diversification has long been central to global portfolio construction. In the early 1990s,emerging-market (EM) equities offered exceptional benefits: low comovement with developed-market(DM) indices and sizable risk-adjusted returns. These benefits were emphasized by the InternationalFinance Corporation (IFC) in the 1980s in its pioneering efforts in establishing the emerging market assetclass (Errunza and van Agtmael 1982, Gill 2012, van Agtmael 1987). Over subsequent decades, however,the very liberalization that broadened access to EMs compressed these premia. As EMs entered majorbenchmarks, attracted foreign capital, and integrated more deeply with advanced markets, correlations withDMs surged, approaching 0.8 by the mid-2000s and remaining elevated since (Figure 1, Panel A). At the This paper asks whether any segment of the global market portfolio remains sufficiently distinct to recreatethe diversification and excess-return potential once associated with EMs. We identify such a frontier amonglow- and middle-income countries (LMICs) with relatively small populations or land areas. The idea that“Small States” behave differently is well established in development policy, where countries with fewerthan 1.5 million people are often grouped together due to their structural vulnerabilities: concentrated In capital markets, smallness has clear implications. Very small LMICs typically have shallow equitymarket capitalizations, thinner trading volumes, limited benchmark inclusion, and a predominantlydomestic investor base. These features limit integration with global capital markets and can preserve returndrivers not fully captured by global risk factors. Lower covariance with developed-market benchmarksincreases their diversification value, reflecting limited financial integration, while structural vulnerabilities We test these ideas using a two-factor benchmark-adjusted return model that regresses portfolio excessreturns on developed- and emerging-market indices. Portfolios are constructed by imposing populationthresholds and value-weighting constituent countries by market capitalization. This approach allows us totrace how alphas and market integration evolve as progressively larger LMICs are included. We find thatportfolios composed of countries with fewer than 20 million people exhibit positive and economicallymeaningful alphas, peaking in the 15 million to 20 million range. In this window, covariance with The results are robust to alternative specifications. Excluding the COVID-19 crisis months does not changethe pattern, nor does measuring returns in euros instead of U.S. dollars. Sorting countries by GDP or GDPper capita fails to reveal a similar premium, underscoring that population and not income or economic scaleis the relevant dimension of segmentation. Sorting countries by land area yields results broadly consistentwith population, suggesting bo