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Emerging Stock Markets after the Crises


  • Morten Balling


  • John Calverley
  • Sarah Hewin
  • Kevin Grice


The paper analyses the performance of emerging equity markets since 1985 in the light of the Asia crisis. Contrary to the high hopes of many investors, emerging markets have severely under-performed as an asset class over the whole period, (es-pecially since 1994), lagging well behind the US and Europe both in returns and volatility. The paper looks at the factors which have driven emerging markets per-formance and asks why returns have been so poor. It finds that periods of strong gains in particular countries and regions followed major policy transformations, for example with the emergence of the Asian miracle in the 1980's, then Latin America's renaissance in the early 1990's and later, Eastern Europe's emergence. Other major factors that frequently play a role are US interest rates and world growth trends. The emerging market crisis of 1997-8 has damaged the credibility of the Asian miracle and investors now seem to be assigning emerging stocks much higher risk premia than before. One reason for this change is the surprisingly weak relationship between profits growth and GDP growth, which the paper suggests may be due partly to over-invest-ment leading to diminishing profitability and partly deficiencies in corporate governance.

Suggested Citation

  • John Calverley & Sarah Hewin & Kevin Grice, 2000. "Emerging Stock Markets after the Crises," SUERF Studies, SUERF - The European Money and Finance Forum, number 6 edited by Morten Balling, March.
  • Handle: RePEc:erf:erfstu:6

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    References listed on IDEAS

    1. Reinhart, Carmen & Montiel, Peter, 2001. "The Dynamics of Capital Movements to Emerging Economies During the 1990s," MPRA Paper 7577, University Library of Munich, Germany.
    2. Kumar, Mohan & Moorthy, Uma & Perraudin, William, 2003. "Predicting emerging market currency crashes," Journal of Empirical Finance, Elsevier, vol. 10(4), pages 427-454, September.
    3. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1-1.
    4. Crafts, Nicholas, 1999. "Implications of Financial Crisis for East Asian Trend Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 110-131, Autumn.
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    Emerging stock markets;


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