Predictable Risk and Returns in Emerging Markets

57 Pages Posted: 17 Jul 2000 Last revised: 19 Aug 2010

See all articles by Campbell R. Harvey

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

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Date Written: January 1994


The emergence of new equity markets in Europe, Latin America, Asia, the Mideast and Africa provides a new menu of opportunities for investors. These markets exhibit high expected returns as well as high volatility. Importantly, the low correlations with developed countries' equity markets significantly reduces the unconditional portfolio risk of a world investor. However, standard global asset pricing models, which assume complete integration of capital markets, fail to explain the cross-section of average returns in emerging countries. An analysis of the predictability of the returns reveals that emerging market returns are more likely than developed countries to be influenced by local information.

Suggested Citation

Harvey, Campbell R., Predictable Risk and Returns in Emerging Markets (January 1994). NBER Working Paper No. w4621. Available at SSRN:

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

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National Bureau of Economic Research (NBER)

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Duke Innovation & Entrepreneurship Initiative ( email )

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