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Cracking the Emerging Markets Enigma
Book

Cracking the Emerging Markets Enigma

G. Andrew Karolyi
Oxford UP, 2015

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Editorial Rating

7

Qualities

  • Innovative
  • Applicable

Recommendation

The risks are many and complex when you invest in emerging markets. G. Andrew Karolyi, a finance professor at Cornell University, takes on the formidable challenge of creating a comprehensive framework of quantifiable risk measures for investing in emerging markets, thereby providing investors with additional tools for making portfolio decisions. He constructs six risk metrics from recent public-source investment data. Karolyi admits that the performances of his indicators are uneven, but his textbook-like, systematic approach may well be an important advancement over conventional decision-making alternatives. This technical work is a difficult read, dense in details of methodology and statistical results, but very worthwhile. While never giving investment advice, getAbstract believes that investment professionals, policy makers and economic researchers could find that this study amounts to required reading in its field.

Take-Aways

  • A country is an emerging market if a lack of capital is holding back its growth.
  • Six risk indicators can evaluate investment opportunities in emerging markets.
  • These are: “market capacity constraints, operational inefficiencies, foreign accessibility restrictions, corporate opacity, limits on legal protections and political instability.”

About the Author

A former president and current trustee of the Financial Management Association, G. Andrew Karolyi is a professor of finance and global business at Cornell University and executive editor of the Review of Financial Studies.

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