Investment opportunities and risks in stock markets: A comparison between emerging and developed economies - Dissertation Example

apter 3 Aims and Methodology 20 3.1 Introduction 20 3.2 Research Aims and Objectives 21 3.4 Research Methodology 23 3.5 Method of Data Collection 23 3.6 Selection of Documents 24 3.7 Qualitative research 24 3.8 Collection of Primary Data 25 3.9 Secondary Research 26 3.10 Ethical Issues/Constraints/Value of this Research 27 3.11 Data Validity and Reliability 28 Chapter 4 Context of the Study 28 4.1 Introduction 28 4.2 Investigation of Secondary Data 29 4.3 Market Portfolio and Efficient Frontier 32 4.

4 The Practical Applications of CAPM 33 Chapter 5 Findings 34 5.1 Introduction 34 5.2 Primary Research 35 5.3 Secondary Research 42 5.4 Theoretical and Practical Implications 43 Chapter 6 Discussion and Analysis 45 6.1 Introduction 45 6.2 Investment Opportunities and Risk Factors 46 6.3 The Comparison of Investment Risks in Emerging and Developed Economies 50 6.4 The Optimal Portfolio Strategy 51 Chapter 7 Conclusion 53 7.1 Conclusion 53 7.2 Limitations of the Study 56 7.3 Directions for Future Research 57 7.

4 Recommendations – The Optimal Portfolio Strategy 57 References 59 Table 1 – The Interview Information of Five Top Officials 66 Table 2 – Country List 66 Table 3 - Expected Returns of Emerging Markets 67 Table 4 - Expected Returns of Developed Markets 68 Table 5 – Construction of the Optimal Portfolio Set 1 70 Table 6 – Construction of the Optimal Portfolio Set 2 71 List of Figures Figure 4.1 Security Market Line p34 Figure 4.2 The Optimal Portfolio p35 Figure 6.1 Purchasing Managers’ Index p53 Chapter 1 Introduction 1.

1 Introduction For over two decades the emerging economies’ markets have generated handsome returns for investors and thus created exciting investment opportunities globally. A careful analysis reveals that the growth of developing. For over two decades the emerging economies’ markets have generated handsome returns for investors and thus created exciting investment opportunities globally. A careful analysis reveals that the growth of developing economies such as Latin America, Asia, and Eastern Europe began to grow at faster rates compared to developed economies.

Some of the major causes for high growth may be attributed to trade liberalisation measures, new economic reforms, adherence to global trade pacts, and opening the door for Western investment. Meanwhile, increased urbanisation and escalating middle class incomes created a new class of a new generation of consumers that have very strong demand for infrastructure developments and consumer goods to support their new lifestyles. Thus, as a result of these significant shifts in market developments, investors were able to enjoy exceptional returns from their investment.

Hence, the emerging markets have provided significant investment opportunities for investors during the past decade or so – whether in fixed income securities, currency market, or equity investment. An investor will seek higher returns in the form of risk premium for taking higher risks of investing for the long run in emerging markets. These markets are expected to benefit from faster economic growth compared to the developed markets in the longer time horizon. This means that a considerable portion of faster economic growth should transform into higher equity market returns and corporate earnings.