In his Nobel Laureate lecture Engle notes that asymmetric volatility has a significant impact on risk. In this article equity market volatility is estimated using an asymmetric power-GARCH model which nests many other popular models. We estimate the magnitude of asymmetric volatility for several emerging and mature markets for three sub-periods. Many mature markets exhibit large magnitudes of asymmetric volatility and several emerging markets do so as well. The magnitude of asymmetry varies by sub-period and is consistent with the suggestion in Campbell and Hentschel (1992) that asymmetry is greater when markets are more volatile.

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This article extends the research on the improvements to the efficient portfolio frontier in globally diversified portfolios. We examine efficient frontiers of regional equity portfolios from developed and undeveloped countries. We show that a globally diversified portfolio has higher reward with less risk than individual regional portfolios. We also show that, in the past 8 years, a US investor would have achieved higher returns for the same risk if diversified in emerging and frontier markets. These results have implications for practical portfolio selection as well as empirical applications of Capital Asset Pricing Model (CAPM).

In this article, we estimate several augmented Treynor and Mazuy (1966) models to examine the performance of hedge fund index returns in four different emerging market regions. In our estimations we match the fund returns with the regional emerging market equity and bond index data, which is a research approach that is pioneered by Fung et�al. (2002). Whether market volatility affects the hedge fund returns or not is one of the main questions that we ask in the article. Our results reveal that stock and bond market volatility do not have a significant impact on fund returns for the most part, which is a result that is robust to various measures of volatility. Among the four regions we examine, only the emerging market hedge funds in the Global market yield statistically significant positive alphas that is robust and sizable. We also find no evidence for market timing skills in these emerging market hedge fund returns.hedge funds, emerging markets, volatility, stocks and bonds, alpha, market timing,