Summary of Cracking the Emerging Markets Enigma

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Cracking the Emerging Markets Enigma book summary
Is it possible to quantify the different risks that investors face in the emerging markets?


7 Overall

8 Applicability

8 Innovation

6 Style


The risks are many and complex when you invest in emerging markets. G. Andrew Karolyi, a finance professor at Cornell University, takes on the formidable challenge of creating a comprehensive framework of quantifiable risk measures for investing in emerging markets, thereby providing investors with additional tools for making portfolio decisions. He constructs six risk metrics from recent public-source investment data. Karolyi admits that the performances of his indicators are uneven, but his textbook-like, systematic approach may well be an important advancement over conventional decision-making alternatives. This technical work is a difficult read, dense in details of methodology and statistical results, but very worthwhile. While never giving investment advice, getAbstract believes that investment professionals, policy makers and economic researchers could find that this study amounts to required reading in its field.

In this summary, you will learn

  • What six risk factors can indicate about investing in emerging markets,
  • How well countries’ risk parameters correlate with the foreign investments they gain and
  • How the US post-2008 stimulus program affected investment flows in emerging markets.


A Framework of Six Risk Indicators
The International Finance Corporation (IFC) classifies a country as an emerging market if it has either “a low- or middle-income economy” or a low “investable market capitalization,” compared to its gross domestic product (GDP). In the later case, a lack...
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About the Author

A former president and current trustee of the Financial Management Association, G. Andrew Karolyi is a professor of finance and global business at Cornell University and executive editor of the Review of Financial Studies.

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