Skewness-Based Portfolio Selection: Implications for International Investing in Frontier Markets


  • Oleksandr I. Rogach Taras Shevchenko National University of Kyiv, Institute of International Relations, Department of International Finance
  • Oleksandr I. Shnyrkov Taras Shevchenko National University of Kyiv, Institute of International Relations, Department of World Economy and International Economic Relations
  • Pavlo V. Dziuba Taras Shevchenko National University of Kyiv, Institute of International Relations, Department of International Finance



international portfolio investing, skewness, frontier markets, returns distribution moments, relative foreign exchange percentage differential


Using the Morgan Stanley Capital International index monthly data for 28 frontier markets during the period between January 2011 and December 2018 the paper investigates the impact of skewness on portfolio selection. The existence of skewness in returns distributions is illustrated in terms of frontier markets. The skewness ranks matrix is developed. It demonstrates that only 6 markets can be regarded as not skewed from USD and 11 – from EUR perspective. The study does not find strong evidence on positive or negative skewness character. All in all, skewness for local currencies is slightly higher than for foreign currencies. It is the factor of international portfolio investing in frontier markets but its impact should not be overestimated. Analytical framework for skewness-based investing in frontier markets is developed. It does not indicate strong evidence that skewness is a more important portfolio selection factor for international investments than for domestic ones. Skewness is rather more relevant for domestic portfolio investing. Using the approach of relative foreign exchange percentage differential, the study proves the more notable impact of skewness for EUR than for USD international investors. As to the preferable moment, the found evidence is weak but rather in favor of skewness than return for local investing and in favor of return for international investing.


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