Investments, tenth edition

  Emerging Markets 

 For a passive strategy, one could argue that a portfolio of equities of just the six countries 

with the largest capitalization would make up 64% (in 2011) of the world portfolio and 

may be sufficiently diversified. However, this argument will not hold for active portfo-

lios that seek to tilt investments toward promising assets. Active portfolios will naturally 

include many stocks or indexes of emerging markets. 

  Table  25.2  makes the point. Surely, active portfolio managers must prudently scour 

stocks in markets such as China and Russia with annual growth rates so far in the 21st cen-

tury in excess of 33% (

1

⁄

3

 per year!).  Table 25.2  shows data from the 20 largest emerging 

markets. But managers also would not want to have missed other markets that exhibited 

marked, if not quite so dramatic, growth over the same years.  

 These 20 emerging markets make up 24% of the world GDP and, together with the 32 

developed markets in  Table 25.1 , make up 92% of the world GDP. Per capita GDP in these 

emerging markets was quite variable, ranging from $1,019 (Pakistan) to $41,122 (Singapore). 

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