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Re-Emerging Markets

Author Info

  • Goetzmann, William N.
  • Jorion, Philippe

Abstract

Recent research shows that emerging markets are distinguished by high returns and low covariances with global market factors. To check whether these results can be attributed to their recent emergence, we simulate a simple, general model of global markets with a realistic survival process. The simulations reveal a number of new effects. We find that pre-emergence returns are systematically lower than post-emergence returns, and that the brevity of a market history is related to the bias in returns as well as to the world beta. These patterns are confirmed by an empirical analysis of emerging and submerged markets.

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Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

Volume (Year): 34 (1999)
Issue (Month): 01 (March)
Pages: 1-32

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Handle: RePEc:cup:jfinqa:v:34:y:1999:i:01:p:1-32_00
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Find related papers by JEL classification:
  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
  • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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  1. Jorion, Philippe, 1985. "International Portfolio Diversification with Estimation Risk," The Journal of Business, University of Chicago Press, vol. 58(3), pages 259-78, July.
  2. Bekaert, Geert & Harvey, Campbell R, 1995. " Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-44, June.
  3. Geert Bekaert & Michael S. Urias, 1995. "Diversification, Integration and Emerging Market Closed-End Funds," NBER Working Papers 4990, National Bureau of Economic Research, Inc.
  4. Harris, Lawrence E & Gurel, Eitan, 1986. " Price and Volume Effects Associated with Changes in the S&P 500 List: New Evidence for the Existence of Price Pressures," Journal of Finance, American Finance Association, vol. 41(4), pages 815-29, September.
  5. William Goetzmann & Philippe Jorion, 1997. "A Century of Global Stock Markets," Yale School of Management Working Papers ysm53, Yale School of Management, revised 01 Aug 2000.
  6. Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
  7. Brown, Stephen J, et al, 1992. "Survivorship Bias in Performance Studies," Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 553-80.
  8. Stambaugh, Robert F., 1997. "Analyzing investments whose histories differ in length," Journal of Financial Economics, Elsevier, vol. 45(3), pages 285-331, September.
  9. Bailey, Warren & Chung, Y. Peter, 1995. "Exchange Rate Fluctuations, Political Risk, and Stock Returns: Some Evidence from an Emerging Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 541-561, December.
  10. Philippe Jorion & William N. Goetzmann, 1998. "A Longer Look at Dividend Yields," Yale School of Management Working Papers ysm41, Yale School of Management.
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