Emerging Markets—No Reward Without Risk

Emerging equities are more volatile than developed market equities. is owes little to the volatility of emerging stock markets in local terms and much more to the strong positive correlation between their local stock markets and movements in their currencies. e spring of 2018 was a classic example of this, with US dollar strength driving signi cant emerging weakness. Emerging markets do exhibit momentum, so it would not be odd for the weakness to persist for another quarter, although a er transaction costs the momentum e ect is probably not capturable.