FIN-06-034
Can Microfinance Reduce Portfolio Volatility?Nicolas Krauss and Ingo Walter November 2006 |
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| FIN-06-034 |
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| Can Microfinance Reduce Portfolio Volatility? |
| Nicolas Krauss and Ingo Walter November 2006 |
| Abstract | |
| Microfinance is arguably one of the most effective techniques for poverty alleviation in developing countries. Although traditionally supported by nongovernmental organizations and socially-oriented investors, microfinance has increasingly demonstrated its value on a stand-alone basis, typically exhibiting low default rates combined with attractive returns, encouraging greater commercial involvement. This paper addresses a related issue – whether microfinance shows low correlation with international and domestic market performance measures, thereby forming the basis for access to global capital markets and performance-driven investors in their search for efficient portfolios. Our empirical tests generally show very low exposure of microfinance institutions to general market movements, suggesting that microfinance portfolios may have useful portfolio diversification value. | |
| Nicolas Krauss | |
| Institution: New York University | |
| Ingo Walter | |
| Institution: Stern School of Business, New York University
Email: iwalter@stern.nyu.edu Home Page: http://www.stern.nyu.edu/~iwalter |
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