[Blueboard] Investing in Emerging Markets

Luis F. Dumlao ldumlao at ateneo.edu
Mon Nov 24 13:53:09 PHT 2014


The Department of Economics of the School of Social Sciences cordially
invites the university community on


*Investing in emerging markets: How do global investors differentiate
between sovereign risks?*



By:


Eli Remolona

Chief Representative for Asia and the Pacific

Bank of International Settlements


1 December 2014, Monday, 4.30 pm, Economics Department, 4/f Leong Hall


Abstract:


When global investors go into emerging markets, how do they differentiate
between the different economies? What fundamentals do they consider? We
analyze these questions by focusing on sovereign risk as reflected in the
pricing of credit default swaps (CDS). Using factor analysis, we identify a
global factor drives CDS returns. This factor is highly correlated with
VIX, a measure of investor risk aversion. When we take the country loadings
on this factor and regress them on fundamentals, we find that the single
most important explanatory variable is simply an indicator of whether or
not the economy is an emerging market.
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