The Risk Exposure of Emerging Equity Markets

Author:
  • CHCampbell R. Harvey
    Campbell R. Harvey
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Abstract
The low correlation between returns in emerging equity markets and industrial equity markets implies that the global investor would benefit from diversification in emerging markets. This article explores the sensitivity of the emerging-market returns to measures of global economic risk. When these traditional measures of risk are used, the emerging markets have little or no sensitivity. This finding is consistent with these markets' being segmented from world capital markets. However, the correlation between the emerging-market returns and the risk factors appears to be changing over time.