This research by academics at Duke and Columbia Universities looks at whether it still makes sense to separate equities allocations into developed and emerging market buckets.
Given the dramatic globalization over the past twenty years, does it make sense to segregate global equities into “developed” and “emerging” market buckets? This paper argues that the answer is still yes.
While correlations between developed and emerging markets have increased, the process of integration of these markets into world markets is incomplete.
To some degree, this accounts for the disparity between emerging equity market capitalisation in investable world equity market benchmarks versus emerging market economies in the world economy.
Currently, emerging markets account for more than 30 per cent of world GDP.
However, they only account for 12.6 per cent of world equity capitalisation. Interestingly, this incomplete integration along with the relatively small equity market capitalisation creates potentially attractive investment opportunities.
The academics argue this research has important policy implications for institutional funds management.
The paper can be accessed here: Emerging Equity Markets in a Globalizing World