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20 February, 2015

Classifying Countries: The Emerging-Developed Continuum

Within Walden Capital we believe in following the evidence.  When it comes to how much of your portfolio to invest in 'emerging markets' it would be fair to say that there are a lot of divergent views, We think that the eivdence suggests that there is a risk premium to be earned from being overweight in the emerginng markets sector, but it is difficult to quantify what that premium might be, largely because no one quite agrees on what an 'emerging market' actually looks like. 

In the early 2000's a plethora of marketing led acronyms were invented, mostly grouping different emerging market economies into clubs depending on their characteristics.  It started with BRICs (Brazil, Russia, India, China), but soon erupted into CIVETS, EAGLEs, MINT, the Next 11, and more. 

All this showed was that no-one really had a good handle on which countries were 'emerging', and which had 'emerged', and were developed.  Of course the truth is that there is a continuum, and in this piece of research from Wes Crill PhD, an Analsyt for Dimensional Fund Advisors you can read about the work he has done to try and quantify both the definition of what is an 'emerging market', and how best to gain exposure to it.

Download the PDF >>>

by John Stirling


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