MIS 4500 Lecture Notes - Emerging Market Debt, Msci Eafe, Stock Market

• School: University of Manitoba
• Department: Management Info. Systems
• Course: MIS 4500
• Professor: Pourang Irani

Document Summary

Need for float adjustment: consider cross-holdings; no int"l equity benchmark uses full cap any more. Emerging market benchmark: msci emf for emerging markets (similar to msci eafe for developed markets) Some transaction costs and reconstitution effects in index changes. Market integration and liberalization: financial liberalization: allowing inward and outward foreign equity investment. Market prices can change upon announcement of liberalization or as soon as investors anticipate liberalization may occur in the future. Expected returns should decrease as volatility decreases; but may become more sensitive to world events (increasing covariance w/ developed markets) Barriers to integration: legal barriers treating foreign and domestic investors differently indirect barriers from differences in available info, accounting standards and investor protection: emerging market risks: liquidity, political risk, economic policy risk, currency risk. Real effects of financial market integration: inflow of foreign investment, boom, currency appreciation. Wake up call channel: second country also experienced similar negative macroeconomic conditions or followed similar inconsistent policies.