Applying multivariate-fractionally integrated volatility analysis on emerging market bond portfolios

Financial Innovation

Table 7 Sample portfolios

Asset Weights
Bonds	Homogen (Short-Term, Long-Term)	GDP Weighted (Short-Term, Long-Term)	MCAP Weighted (Short-Term, Long-Term)
Indonesia	17%	13%	5%
Brazil	17%	26%	52%
India	17%	33%	21%
South Africa	17%	4%	6%
Mexico	17%	14%	12%
Turkey	17%	11%	4%
	MV-Optimal Portfolios Average (Short-Term)	MV-Optimal Portfolios Average (Long-Term)
Indonesia	29%	22%
Brazil	19%	17%
India	41%	34%
South Africa	5%	10%
Mexico	3%	15%
Turkey	3%	2%

Notes: For the GDP weighted portoflios, IMF 2017 year end nominal GDP levels are considered. On the MCAP Weights, total outstanding amount of bonds for each country is taken into account. For the MV-Optimal portfolios, the weights are averages of the optimal portfolios that are calculated for each week. Risk-free rate is assumed as zero and the optimizations are done by Markowitz approach with the bi-weekly mean and volatility forecasts of the model estimations