Predictable Risk and Returns in Emerging Markets

THE REVIEW OF FINANCIAL STUDIES, Vol. 8 No. 3

Posted: 22 Aug 1998

See all articles by Campbell R. Harvey

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

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Abstract

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.

JEL Classification: G15

Suggested Citation

Harvey, Campbell R., Predictable Risk and Returns in Emerging Markets. THE REVIEW OF FINANCIAL STUDIES, Vol. 8 No. 3, Available at SSRN: https://ssrn.com/abstract=6864

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

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HOME PAGE: http://www.duke.edu/~charvey

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