Make it your homepage |   E-mail: Subscribe Unsubscribe

U.S. and Mexico Partner to Increase Cacao Production in El Salvador


Wednesday, April 16, 2014
News Making Money

Emerging market equity performance suffers setbacks

13/02/2014 14:07 (62 Day 02:17 minutes ago)

The FINANCIAL -- After exceptional performance during the first decade of the 21st century, emerging market equities have recently suffered setbacks, say London Business School authors of the Credit Suisse Global Investment Returns Yearbook 2014. Long-term investors are advised not to be overly influenced by these short-term fluctuations.

ADVERTISEMENT


The authors, Elroy Dimson, Paul Marsh, and Mike Staunton of London Business School, explain: “The first article in the 2014 Yearbook presents an evidence-based review of the performance of 85 markets around the world. Of these, 23 were developed markets, while 62 were developing markets – either emerging or frontier markets.

“The long-term (114-year) equity risk premium for a US investor in emerging markets was 3.4%, as compared to 4.3% for developed markets. However, this underperformance can be traced back to the distant 1940s and we expect superior returns in the future, in line with the higher risk of emerging markets.”

The authors also look at the incidence of financial crises in both emerging and developed markets. They conclude that: “Despite the popular conception, contagion is not the norm during emerging market crises. In contrast, crises originating in developed markets have proved far more contagious.”
 
The value effect, say the authors, has been strong both within emerging markets and as the basis for a successful rotation strategy between markets. They document the continuing diversification benefits from emerging markets, and assert that the recent turn of sentiment against emerging markets seems overly pessimistic from the perspective of a long-term investor.

Published by the Credit Suisse Research Institute in collaboration with London Business School, the 2014 Yearbook also revisits the authors’ finding, in their widely-cited book Triumph of the Optimists, that stock returns fail to mirror economic growth, and presents new evidence and explanations for this puzzle.

The authors show that population flows tend to reflect aggregate economic growth. Increases in gross domestic product (GDP) therefore tend to be spread over an enlarged population. They find that economies rarely maintain a high rate of uninterrupted growth over a sequence of years, and setbacks are commonplace.

Though difficult for investors to capture in portfolio returns, they show that stronger GDP growth is generally good for investors. The authors warn against chasing the shares of countries that have historically grown fast. However, they also show that perfect forecasts of future GDP changes would be very valuable to investors, while cautioning that it is hard to make accurate predictions of changes that are not already discounted in stock prices.

 

“The recovery in developed world economies now appears to be well under way. However, there are concerns that some emerging countries will confront a more challenging future. In this context, the Credit Suisse Global Investment Returns Yearbook 2014 examines the relationship between GDP growth, stock returns and the long-run performance of emerging markets,” said
Giles Keating, Head of Research and Deputy Global CIO for Private Banking and wealth Management at Credit Suisse.

 

“At a time when investors are confronted by the prevailing volatility in capital markets, particularly emerging markets, the data in the Yearbook, now stretching back 114 years and spanning 23 countries, provides investors a unique perspective with which to make informed asset allocation decisions,” said Stefano Natella, Head of Global Securities Research for Investment Banking at Credit Suisse.

 

 

Make Your Comment

Add NewSearchRSS
Only registered users and facebook social network members can write comments!

This text is replaced by the Flash movie.
This text is replaced by the Flash movie.
Politics
Transparency and Efficiency to Strengthen Public Financial Management Systems in Lebanon

16/04/2014 13:27 (02:57 minutes ago)

The FINANCIAL -- A new project will enhance the efficiency of financial management systems and promote effective use of public resources in Lebanon. The US$ 5.2 million loan will strengthen the capacity of the Ministry of Finance in fiscal policy analysis and debt management, according to the World Bank Group.

Read more...



TRAVEL BIZ »
PRESS RELEASES »
FINANCIAL »
UKRAINE »
GEORGIA »
WORLD »
BANKS »
BUSINESS »
TECH »
MARKETS »
B SCHOOLS »
SPECIAL REPORTS »

Markets
Attack of the Clones: New Kids on the Block Shake Up CEE Consumables Space

12/04/2014 16:44 (3 Day 23:40 minutes ago)

The FINANCIAL -- Thriving sales of cheap new-build compatible products are having a profound impact on the CEE printer and MFP consumables market, according to global market intelligence firm International Data Corporation (IDC).

INSURANCE
Nearly 80% of European insurers are on track to implement Solvency II by 1 Jan 2016

11/04/2014 18:01 (4 Day 22:23 minutes ago)

The FINANCIAL -- Nearly 80% of European insurers expect to meet Solvency II requirements before January 2016, according to EY’s European Solvency II Survey 2014. Overall, Dutch, UK and Nordic insurers are the best prepared, while French, German, Greek and East European (CEE) insurers are less confident, according to Ernst & Young Global Limited.

Read more...






Developed by Aleksandre Chiabrishvili

Design built by Creo Group