BUSI 4502 Study Guide - Final Guide: Cfa Institute, Emerging Markets

• School: Carleton University
• Department: Business
• Course: BUSI 4502
• Professor: Bill Lawson

Document Summary

This article discuss regarding the capital markets in developing countries. In order to examine the accuracy of the theory, the author uses the. )nternational finance corporation(cid:495)s (cid:523))fc(cid:524) emerging markets data base (cid:523)embd(cid:524) to determine their risk and return along with the diversification benefit. The period of the sample is two decades, which is from 1975 to 1995. The results of this empirical research agree partially with the theory in terms of high volatility and diversification benefits. Despite that, evidence shows that the diversification benefit may not apply during financial crisis. As for the high return, the emerging market performance may not reflect high average return. However, this may differ based on the time period measured. In conclusion, the emerging markets are an important asset class. There are also issues faced when investing on the emerging markets. Foreign investors will face difficulty in investing certain equity due to restriction enforced by the local law and legislation.