Date of Award


Degree Type


Degree Name

Master of Business


Faculty of Business and Public Management

First Advisor

Prof David E. Allen


This study evaluates the potential benefits that investors obtain from diversifying their portfolios into emerging markets when the time varying behavior of assets is considered. It also tests whether the existing asset-pricing model developed in the context of developed markets, which assumes complete integration, can explain the expected returns in emerging markets and determines the risk of investing in these markets using cross section and time series data. An international capital asset pricing model (ICAPM) with time varying moments developed by Harvey (1991) is adopted. The conditional asset-pricing model, which takes into account prevailing world economic factors, was used. The Generalized Methods of Moments (GMM) is used to test the model. Results indicate that some markets have become more integrated to the world markets than they were in the 1980s and other which failed to open their economies fully have become more segmented. The thesis looks at regional markets of Latin America, Africa Sub-Sahara, Middle East and North Africa, East Europe and Asia. A number of authors have looked at the emerging markets of Asia and Latin America but little is known about the African, Middle East and East Europe markets. The innovation of this research is it looked at the behavior of assets in all regional global markets and sees if they behave differently.