Black Swans in Emerging Markets

Posted: 22 May 2019

Date Written: September 3, 2008


Do investors in emerging markets obtain their long term returns smoothly and steadily over time, or is their long term performance largely determined by the return of just a few outliers? Are investors likely to successfully predict the best days to be in and out of these markets? The evidence from 16 emerging equity markets and over 110,000 daily returns shows that a few outliers have a massive impact on long term performance. On average across all 16 markets, missing the best 10 days resulted in portfolios 69.3% less valuable than a passive investment; and avoiding the worst 10 days resulted in portfolios 337.1% more valuable than a passive investment. Given that 10 days represent 0.15% of the days considered in the average market, this evidence strongly suggests that the odds against consistently successful market timing in emerging markets are staggering.

Keywords: Black swans, outliers, emerging markets, performance

JEL Classification: G11

Suggested Citation

Estrada, Javier, Black Swans in Emerging Markets (September 3, 2008)., Available at SSRN: or

Javier Estrada (Contact Author)

IESE Business School ( email )

IESE Business School
Av. Pearson 21
Barcelona, 08034
+34 93 253 4200 (Phone)
+34 93 253 4343 (Fax)

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