The Unique Investment Risks of the Emerging Financial Markets

Abstract

The significance of the Emerging Financial Markets (EFMs) is on a steady rise. They offer significant advantages for international investors such as high yields and broader chance of global portfolio diversification. However, there exist unique risks of investments in EFMs that should be carefully observed. This article is a summary those risks such as the risk of survival bias, non-normality of returns, the peso problem, contagion issues, commodity and natural resource curse among other problems that investors should pay attention to in EFMs. At the end, a top-down analysis approach is recommended in this article to those investors who will invest in EFMs.