Frontier markets are considered a good destination for international diversification due to their low level of integration with global markets. However, a diversification strategy into frontier markets with respect to country factors does not optimally capture their full diversification potential. Enhancing this strategy by simultaneously incorporating industry factors improves the ability to diversify portfolio risk. We investigate the industry costs of equity in frontier markets using five asset pricing models, taking into account the differences in five regions of frontier markets, namely, Africa, Eastern Europe, the Middle East, Latin America and Caribbean, and Asia. Additionally, we examine how well the explanatory factors of developed and emerging markets can explain industry returns in frontier markets. Our results precisely identified two industries in Africa, and two industries in Eastern Europe that exhibit segmentation from developed markets, and two industries in Africa and one industry in Asia show segmentation from emerging markets. However, we document the limited temporal variation in four regions of frontier markets indicating more precise estimates than US, UK, and European ones. Unlike previous studies, our findings show that the time-varying slopes in frontier markets follow a random-walk process.

由于与全球市场的融合程度较低，前沿市场被认为是国际多元化的良好目的地。然而，在国家因素方面进入前沿市场的多元化战略并不能充分发挥其全部的多元化潜力。通过同时纳入行业因素来加强这一战略，可以提高分散投资组合风险的能力。我们使用五种资产定价模型考察了前沿市场的行业股权成本，同时考虑了前沿市场非洲、东欧、中东、拉丁美洲和加勒比地区以及亚洲五个地区的差异。此外，我们研究了发达市场和新兴市场的解释因素在多大程度上可以解释前沿市场的行业回报。我们的结果准确地确定了非洲的两个行业和东欧的两个行业表现出发达市场的细分，非洲的两个行业和亚洲的一个行业表现出新兴市场的细分。然而，我们记录了前沿市场四个区域的有限时间变化，表明比美国、英国和欧洲的估计更精确。与之前的研究不同，我们的研究结果表明，前沿市场的时变斜率遵循随机游走过程。和欧洲的。与之前的研究不同，我们的研究结果表明，前沿市场的时变斜率遵循随机游走过程。和欧洲的。与之前的研究不同，我们的研究结果表明，前沿市场的时变斜率遵循随机游走过程。