Emerging Equity Markets in a Globalizing World

25 Pages Posted: 26 Oct 2013 Last revised: 9 Apr 2017

Geert Bekaert

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Campbell R. Harvey

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

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2017

Abstract

Given the dramatic globalization over the past twenty years, does it make sense to segregate global equities into “developed” and “emerging” market buckets? We argue that the answer is still yes. While correlations between developed and emerging markets have increased, the process of integration of these markets into world markets is incomplete. To some degree, this accounts for the disparity between emerging equity market capitalization in investable world equity market benchmarks versus emerging market economies in the world economy. Currently, emerging markets account for about 40% of world GDP. However, they only account for 10.8% of world equity capitalization. This incomplete integration along with the relatively small equity market capitalization should be taken into account in portfolio allocation. Other asset classes within emerging markets (such as corporate bonds and currencies) are also viable.

Keywords: Emerging markets, GDP weights, Market integration, Market segmentation, Illiquidity, Liquidity, Portfolio risk, Portfolio correlation, Market capitalization, Risk characteristics, Cross-sectional volatility, Valuation ratios, Asset class

JEL Classification: G11, G15, G18, G24, F36

Suggested Citation

Bekaert, Geert and Harvey, Campbell R., Emerging Equity Markets in a Globalizing World (April 7, 2017). Available at SSRN: https://ssrn.com/abstract=2344817 or http://dx.doi.org/10.2139/ssrn.2344817

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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