Re-Emerging Markets

54 Pages Posted: 14 Apr 1998

See all articles by Philippe Jorion

Philippe Jorion

University of California, Irvine - Paul Merage School of Business

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: April 13, 1996


Recent research shows that emerging markets are distinguished by high returns and low covariances with global market factors. These are striking results, because of their immediate implications for the international investor. One key issue is whether these results may be attributed to selection biases. In particular, we only observe markets that have "emerged," where emergence is typically conditioned upon recently exceeding a size threshold. We often do not have information about markets that "submerged" in the past, and then "re-emerged" recently. Most of today's emerging markets are actually re- emerging markets, but data before their last submergence is difficult to obtain. We simulate a simple, general model of global markets, in which markets are priced according to a world factor, but for which returns are only observed if the market capitalization exceeds a threshold at the end of the observation period. The simulations reveal that recently emerged markets display substantial biases in observed returns -- returns are too high. Conditioning upon recent emergence "picks out" markets with low betas. Turning to recent empirical evidence, we show that there are reasons to suspect conditioning biases. In particular, returns immediately after emergence are greater than later on, and than before emergence. We also report that the performance of less-followed submerged markets is typically inferior to that of emerged markets.

JEL Classification: R31

Suggested Citation

Jorion, Philippe and Goetzmann, William N., Re-Emerging Markets (April 13, 1996). Available at SSRN: or

Philippe Jorion

University of California, Irvine - Paul Merage School of Business ( email )

Campus Drive
Irvine, CA 92697-3125
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William N. Goetzmann (Contact Author)

Yale School of Management - International Center for Finance ( email )

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National Bureau of Economic Research (NBER)

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