Even though there has been dramatic globalisation over the past 20 years it still makes sense to segregate global equities into “developed” and “emerging” market buckets, according to a paper by Columbia and Duke academics.
The research, which has important policy implications for institutional and pension fund management, shows that while correlations between developed and emerging markets have increased, the process of integration of these markets into world markets is incomplete.
Emerging markets account for more than 30 per cent of world GDP, but they only account for 12.6 per cent of world equity capitalisation. They argue this incomplete integration along with the relatively small equity market capitalisation creates potentially attractive investment opportunities.
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