Exploring Factor Investing in Emerging Markets
- Emerging-market (EM) factor indexes have performed well long term, mirroring the pattern in developed-market (DM) factor indexes. The systematic risks and behavioral biases driving factor premia in DM may also extend to EM.
- EM factor indexes exhibited modest correlations with DM factor indexes, suggesting their performance was swayed more by unique local market conditions, which DM factor indexes may not fully capture.
- Country-specific effects contributed significantly to overall active risk in EM, higher than their impact in DM factors indexes, underscoring the importance of considering country effects in selecting EM investment strategies.
In 2023, the spotlight is shining again on emerging economies. Recent shifts in these markets,…
