Allocating resources efficiently has been one of the major issues in Finance. If domestic factors are the key reasons for local assets to move together, the investor should search for other markets in order to diversify the local risk. This topic has been analyzed considering the risk-return tradeoff. However, one of the main problems is not taking the uncertainty input parameters into account triggering estimation risk concerns. This article analyzes whether the inclusion of stocks from other Latin American countries improve the efficient frontier from a Brazilian investor's point of view. The combination of inferences about tangency portfolio (Britten-Jones, 1999) and global minimum risk portfolio (Kempf e Memmel, 2006) was implemented. From the results, it can be concluded that the inclusion of other Latin American stocks would improve the efficient frontier for local investors with statistically significant portfolio weights.
Portfolio; Diversification; Inference
