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Essay / Research Paper Abstract
This 15 page paper looks at the research and the manifestation of risk and reward in emerging markets. The paper argues that although the emerging and the developed markets are different the overall risk and reward profile is less differentiated that usually perceived and that performance and risk may be lower than expected and can be explained with reference to some investment theories, such as CAPM with the divergences from the theory explain by other models. The bibliography cites 21 sources.
Page Count:
15 pages (~225 words per page)
File: TS14_TEemergrr.rtf
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Unformatted sample text from the term paper:
increase as the perceived risk increases, meaning that investors may be prepared to take an increased risk but they will also require increased compensation. This is basic investment theory and
has been used to justify the profile of many emerging markets, where it is generally perceived that the risk and reward profile is much higher. This paper will argue that
although the markets are different the overall risk and reward profile is less differentiated that may be expected when measured with results, and that the enthusiasm that is seen for
emerging markets is often the result of over exuberance rather than the manifestation of economic and investment theory especially as there can be argued to be the lower difference than
expected. If we are going to consider the aspects of risk and reward in an emerging market the first task is t define what is meant by an emerging
market. The definition of an emerging market by The International Finance Corporation (IFC) is one that is within a "developing" country or one that is in a country that has
a "low-to-middle income economy". Otherwise we can look to the work of Divecha et al, (1992) where an emerging market is one where securities are traded in the public market,
is not defined as a developed market by indices such as the Financial Times Indices or the Morgan Stanley Capital Indices and is also a market where there is the
interest of institution investors form other countries on a global scale and the market also has reliable data sources (Divecha et al, 1992). Looking at the central thesis that
although the developed and emerging markets are different the overall risk and reward profile is less differentiated that may be expected we need to consider the evidence for this proposition.
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