{"type":"script","doc_desc":{"producers":[{"name":"Reproducibility WBG","abbr":"DECDI","affiliation":"World Bank - Development Impact Department","role":"Verification and preparation of metadata"}],"prod_date":"2026-01-05","version":"1"},"project_desc":{"authoring_entity":[{"name":"Alvaro Pedraza","affiliation":"World Bank","email":"apedrazamorales@worldbank.org"},{"name":"Dilip Ratha","affiliation":"Word Bank","email":"dratha@worldbank.org"}],"title_statement":{"title":"Reproducibility package for Small Emerging Markets: A New Asset Class","idno":"RR_WLD_2025_524"},"data_statement":"Some data is limited-access and has not been included in the reproducibility package. For more details, please refer to the README file.","software":[{"name":"Stata","version":"19.5 MP"}],"scripts":[{"title":"Reproducibility package for Small Emerging Markets: A New Asset Class","date":"2026-01","notes":"Computational reproducibility verified by Development Impact (DECDI) Analytics team, World Bank.","instructions":"See README in reproducibility package.","file_name":"RR_WLD_2025_524","zip_package":"RR_WLD_2025_524.zip","dependencies":"Stata dependencies are listed in the ado folder."}],"repository_uri":[{"name":"Reproducible Research Repository (World Bank)","uri":"https:\/\/reproducibility.worldbank.org"}],"production_date":"2026-01-05","abstract":"This paper examines whether small low- and middle-income countries (LMICs) offer excess returns and diversification benefits to global investors. Using monthly equity price data from 2015\u20132025, we pool listed stocks from LMICs whose populations fall below a given threshold and construct value-weighted portfolios, sorted by population and land area. We then estimate a two-factor asset-pricing model to evaluate their risk-adjusted performance relative to developed- and emerging-market benchmarks. Portfolios restricted to countries with fewer than 20 million people\u2014or less than 100,000 square kilometers\u2014earn positive and economically meaningful alphas alongside low covariances with global-market returns. Risk-adjusted performance, measured by an adjusted Treynor ratio, peaks in the 15\u201320 million population range. Once larger LMICs enter the portfolio, integration with global markets rises sharply, alphas converge to zero, and diversification benefits vanish. No analogous pattern appears among high-income countries, where even very small markets are fully integrated. These results point to a \u201cSmall Emerging Market Asset Class\u201d: small developing economies remain partially segmented, combining exposure to undiversifiable country-specific risks stemming from structural vulnerability (e.g., heightened climate and environmental risk) with limited financial integration, for which investors appear to be compensated. Small LMICs thus form a distinct frontier for international portfolio diversification.","geographic_units":[{"name":"World","code":"WLD"}],"keywords":[{"name":"Small States"},{"name":"Emerging Markets"},{"name":"International Diversification"},{"name":"Financial Integration"},{"name":"Excess Returns"}],"topics":[{"id":"G11","uri":"https:\/\/www.aeaweb.org\/econlit\/jelCodes.php?view=jel","vocabulary":"Journal of Economic Literature (JEL)","name":"Portfolio Choice \u2022 Investment Decisions","parent_id":"G1"},{"id":" G15","uri":"https:\/\/www.aeaweb.org\/econlit\/jelCodes.php?view=jel","vocabulary":"Journal of Economic Literature (JEL)","name":"International Financial Markets","parent_id":"G1"},{"id":" F21","uri":"https:\/\/www.aeaweb.org\/econlit\/jelCodes.php?view=jel","vocabulary":"Journal of Economic Literature (JEL)","name":"International Investment \u2022 Long-Term Capital Movements","parent_id":"F2"},{"id":" O16","uri":"https:\/\/www.aeaweb.org\/econlit\/jelCodes.php?view=jel","vocabulary":"Journal of Economic Literature (JEL)","name":"Financial Markets \u2022 Saving and Capital Investment \u2022 Corporate Finance and Governance","parent_id":"O1"}],"output":[{"type":"Working Paper","description":"Policy Research Working Papers (PRWP)","title":"Small Emerging Markets: A New Asset Class"}],"language":[{"name":"English","code":"EN"}],"technology_requirements":"Runtime: 2 minutes","disclaimer":"The materials in the reproducibility packages are distributed as they were prepared by the staff of the International Bank for Reconstruction and Development\/The World Bank. The findings, interpretations, and conclusions expressed in this event do not necessarily reflect the views of the World Bank, the Executive Directors of the World Bank, or the governments they represent. The World Bank does not guarantee the accuracy of the materials included in the reproducibility package.","license":[{"name":"Modified BSD3","uri":"https:\/\/opensource.org\/license\/bsd-3-clause\/"}],"contacts":[{"name":"Alvaro Pedraza","affiliation":"World Bank","email":"apedrazamorales@worldbank.org"},{"name":"Reproducibility WBG","affiliation":"World Bank","email":"reproducibility@worldbank.org"}],"reproduction_instructions":"Some data is limited-access and has been not included in the reproducibility package. Once users have access to all the data, to reproduce the findings, a new user needs to:\n1. Adjust the file path in the `Main.do` do-file \n2. Run the code","technology_environment":"Paper exhibits were reproduced on a computer with the following specifications:\n\u2022 OS: Windows 11 Enterprise\n\u2022 Processor: Intel(R) Xeon(R) Gold 6226R CPU @ 2.90GHz\n\u2022 Memory available: 16.0 GB","datasets":[{"name":"World Development Indicators","note":"Source: World Bank.\nFile location: \"Data\\Raw\\country_gdp_area.xlsx\".\nIndicators used: Population, total(SP.POP.TOTL), Surface area (sq. km) (AG.SRF.TOTL.K2), GDP per capita (current US$) (NY.GDP.PCAP.CD), GDP (constant 2015 US$) (NY.GDP.MKTP.KD).\nData was accessed on December 12, 2025.","access_type":"Data is publicly available and included in the reproducibility package.","license":"Creative Commons Attribution 4.0 (CC-BY 4.0)","license_uri":"https:\/\/www.worldbank.org\/en\/about\/legal\/terms-of-use-for-datasets","uri":"https:\/\/data.worldbank.org\/indicator\/","citation":"World Bank. (2025). \"World Development Indicators\" [Dataset]. World Bank. Available at https:\/\/databank.worldbank.org\/source\/world-development-indicators. Accessed on December 12, 2025."},{"name":"Climate and Environmental Vulnerability","note":"Source: Notre Dame Global Adaptation Initiative (ND-GAIN)\nFile location: \"Data\\Raw\\vulnerability.csv\".\nData was accessed on December 12, 2025.","uri":"https:\/\/gain.nd.edu\/our-work\/country-index\/download-data\/","citation":"Notre Dame Global Adaptation Initiative Country Index (ND-GAIN). (2025). University of Notre Dame.","access_type":"Data is publicly available but does not allow redistribution and it is not included in the reproducibility package. For more details, please refer to the README file."},{"name":"Financial Openness","note":"Source: The Chinn-Ito index (KAOPEN) index \nFile location: \"Data\\Raw\\kaopen_2022.dta\".\nData was accessed on December 12, 2025.","citation":"Chinn, Menzie D. and Hiro Ito (2006). \"What Matters for Financial Development? Capital Controls, Institutions, and Interactions,\" Journal of Development Economics, Volume 81, Issue 1, Pages 163-192 (October).","uri":"https:\/\/web.pdx.edu\/~ito\/Chinn-Ito_website.htm","access_type":"Data is publicly available but does not allow redistribution and it is not included in the reproducibility package. For more details, please refer to the README file."},{"name":"Export Concentration","access_type":"Data is publicly available but does not allow redistribution and it is not included in the reproducibility package. For more details, please refer to the README file.","uri":"https:\/\/unctadstat.unctad.org\/datacentre\/","note":"Source: UNCTAD (United Nations Conference on Trade and Development)\nFile location: \"Data\\Raw\\US_ConcentDiversIndices.csv\".\nData was accessed on December 12, 2025.","citation":"United Nations Conference on Trade and Development (UNCTAD). (n.d.). Merchandise: Product concentration and diversification indices of exports and imports, annual (analytical)\n[Dataset]. Available at UNCTADstat Data Hub https:\/\/unctadstat.unctad.org\/datacentre. Accessed on December 12, 2025."},{"name":"Equity market data","note":"Source: Bloomberg\nFile location: \"Data\\Raw\\data.xlsx\".","access_type":"Data access requires purchase and is not included in the reproducibility package. For more details, please refer to the README file.","citation":"Bloomberg L.P. (n.d.). Bloomberg Professional Service [Data]. Retrieved via Bloomberg Terminal."},{"name":"MSCI Developed and Emerging Market Indices","note":"Source: Bloomberg\nFile location: \"Data\\Raw\\msc_global_eme.dta\".","access_type":"Data access requires purchase and is not included in the reproducibility package. For more details, please refer to the README file.","citation":"Bloomberg L.P. (n.d.). Bloomberg Professional Service [Data]. Retrieved via Bloomberg Terminal."}]},"tags":[{"tag":"DOI"},{"tag":"Open Code"},{"tag":"Restricted Data"}],"schematype":"script"}