Housekeeping and Plumbing: The Investability of Emerging Markets
The authors look at the investment allocation process employed by portfolio investors in emerging markets. In particular, they examine the first of a two-stage decision process: first, investors create a subset of countries with investments potenti...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/03/3034747/housekeeping-plumbing-investability-emerging-markets http://hdl.handle.net/10986/14203 |
| Summary: | The authors look at the investment
allocation process employed by portfolio investors in
emerging markets. In particular, they examine the first of a
two-stage decision process: first, investors create a subset
of countries with investments potential, to be analyzed
later in further detail; second, they weigh expected returns
versus risk and subsequently allocate their funds. The
authors hypothesize that the determination of whether a
country has potential investment opportunities, or not is
influenced by a number of factors, especially related to
size, quality of "housekeeping," (macroeconomic
policies, political economy, local financial markets,
corporate governance, and so on), and efficiency of
"plumbing" (legal and regulatory framework,
custody, clearing and settlement, taxes, and so on). By
interviewing many types of these investors in both the
United States and the United Kingdom, the authors delve into
their decision-making processes, as well as attempt to
uncover the factors they indicate, matter most in defining
the "investment opportunities" universe. They
determine the relative importance of such housekeeping, and
plumbing factors while highlighting the role of external
issues, such as index benchmarking and U.S. foreign policy.
The authors recognize from the outset that the most profound
effects on investment flows, or the required minimum
expected returns, arise from improvements or deteriorations
in macroeconomic policies. However, at the margin,
improvements can be made in country policies that will, for
a given macroeconomic situation, improve the ability of a
country to attract international investment flows. |
|---|