Emerging markets are subject to periodic crisis. Most of the time, the crisis does not spread beyond the local region. True or False
During the crisis, does that increase the correlation with developed markets - True/False作者: susana 时间: 2011-7-13 13:06
Pure guesswork
1) True - based on contagion
2) False作者: zwjy 时间: 2011-7-13 13:06
false
no作者: Chuckrox 时间: 2011-7-13 13:06
True to both. The correlation is related to the volatility not the emerging market. There is a correlation between volatility between emerging and developed during times of crisis due to the volatility itself.作者: Windjam 时间: 2011-7-13 13:06
true
true作者: Colum 时间: 2011-7-13 13:06
How could the first one be true? It could spread to neighboring emerging market although it may not spread to developed countries.作者: lcw77 时间: 2011-7-13 13:06
first one is false作者: infinitybenzo 时间: 2011-7-13 13:06
False ( see Asia currency crisis ----->russia crisis ------------>LTCM)
True ( one of the criticism of emerging market investing)作者: Roflnadal 时间: 2011-7-13 13:06
True to both. (Deriv - mark the word -"does not spread beyound local region"作者: mp3bu 时间: 2011-7-13 13:06
question from CFAI
The first question asks "most of the time" so it is true
Edited 1 time(s). Last edit at Sunday, May 29, 2011 at 11:01AM by drk.作者: mik82 时间: 2011-7-13 13:06
im having a hard time believeing the 1st one to be true does anyone have a cfai reference.......please provide作者: IAmNeil 时间: 2011-7-13 13:06
I misinterpret the local region as single country , it is many countries in a region作者: Darien 时间: 2011-7-13 13:06
Thanks Goodman
wow what can i say i guess A is true , emerging market crisis are not likely to spread beyond its region
by the way where is this taken from exactly作者: liangfeng 时间: 2011-7-13 13:06
reading27作者: liangfeng 时间: 2011-7-13 13:06
I think it was int he mock too作者: wake2000 时间: 2011-7-13 13:06
pimpineasy Wrote:
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> correlations breakdown during crisis
> ..........devloped markets and developing nations
> exhibit higher correlations
Is that correct? I thought it was shown that the vol increase was a weakness of the measure and not necessarily increased correlations. Contagion situations do cause higher correlations but it is often very hard to prove contagion.作者: bboo 时间: 2011-7-13 13:06
That's what I'm getting confused about. On one hand, it states that during periods of crises, the correlations increase which is ironic when you use emerging markets as diversifiers.
Then they state a rebuttal stating that, in fact that correlations do NOT increase, rather it's just a case of increased volatilities?
Or am I way off base?作者: bpdulog 时间: 2011-7-13 13:06
ih8studying Wrote:
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> That's what I'm getting confused about. On one
> hand, it states that during periods of crises, the
> correlations increase which is ironic when you use
> emerging markets as diversifiers.
>
> Then they state a rebuttal stating that, in fact
> that correlations do NOT increase, rather it's
> just a case of increased volatilities?
>
> Or am I way off base?
That's exactly the way I read it. Correlations increase but it is an error in the way correlations are measured as volatility the denominator increases so covariances/correlations do not actually increase.
Literally the next pages contradicts the page before it.作者: Valores 时间: 2011-7-13 13:06
I will go with these answers based on CFAI mock.作者: Colum 时间: 2011-7-13 13:07
