Also refer to the MCom + MIB Student Guide

Description

Emerging financial markets have certain features that differentiate them from financial markets in developed countries. These differences bring about special challenges and provide diverse range of opportunities for investors. Investment in emerging markets exhibit high expected return, high volatility and low correlation of return with return in developed markets. Higher rate of return is usually attributed to faster economic growth and to market inefficiency. Higher risk arises from currency fluctuations, restrictions on foreign investment and on repatriation of capital, potential price volatility, lesser liquidity of traded shares, nationalisation or expropriation of assets and political instability. From a practical point of view, the challenge for prudent investors is how to deal with these risks in order to benefit from higher rate of return provided by these markets. From a theoretical point of view, the challenge is how to modify the traditional models in order to make them more relevant to issues that are specific to emerging markets. We discuss investment issues in emerging markets from both theoretical and practical point of views. Geographic focus is in Asian countries.

Topics

• Characteristics of emerging financial markets.
• Recent developments in emerging markets: Implications of privatisation, integration/liberalization, and reforms.
• Portfolio versus direct investment in emerging markets.
• Asset allocation, volatility and linkages in emerging capital markets.
• Political risk, currency risk, speculative craze, and market manipulation.
• Financial crises in emerging markets.
• Systematic risk and alternative CAPM for emerging financial markets.
• Valuation of companies in emerging markets.
• Valuation of direct investment and the cost of capital in emerging markets.
• Risk management and hedging practices in emerging markets.