Investments, tenth edition

  Are Investments in Emerging Markets Riskier? 

 In  Figure  25.3 , developed countries and emerging markets are separately ordered from 

lowest to highest standard deviation. The standard deviations of investments in emerg-

ing markets are charted with those in developed countries. The graphs clearly show that, 

considered as total portfolios, emerging markets are generally riskier than developed coun-

tries, at least when risk is measured by total volatility of returns. Still, you can find emerg-

ing markets that appear safer than some developed countries. However, if one considers 

adding a foreign country index to an indexed U.S. portfolio, the relevant risk measure is 

the country’s beta against the U.S.  

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  Figure 25.4  ranks and charts the betas of country returns (in U.S. dollars) against the 

U.S. index. It shows that betas of six developed and eight emerging markets were estimated 

to be below 1. Notice, however, that this is only about one-third of all 48 foreign markets. 

Thus we can foresee the conclusion: A well-diversified international portfolio may well be 

riskier than the U.S. alone, which has consistently exhibited the lowest standard  deviation 

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25

Standard Deviation (%/month)

Rank

Markets are ranked by SD of return, from low to high

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24

23

22

21

20

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2

1

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1

Developed + World

Emerging

  1

U.S.

Malaysia 

  2

Japan

Morocco 

  3

Switzerland

Jordan 

  4

U.K.

Chile 

  5

Israel

Mexico 

  6

New Zealand Philippines 

  7

Canada

Taiwan 

  8

Hong Kong

Czech Republic 

  9

Denmark

South Africa

10

Singapore

China

11

Portugal

Thailand

12

Australia

Colombia

13

France Korea

14

Netherlands

India

15

Italy

Peru

16

Belgium

Indonesia

17

Spain

Pakistan

18

Ireland

Poland

19

Germany

Egypt

20

Sweden

Russia

21

Austria

Hungary

22

Finland

Brazil

23

Norway

Sri Lanka

24

Greece

Argentina

25

Turkey