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Factors That Affect Emerging Stock Markets - Literature review Example

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In the paper “Factors That Affect Emerging Stock Markets” the author tries to measure the extent up to which oil influences the growth of the stock market in emerging economies. Oil is the world’s largest basic commodity and it is important to consider finding some important relationship…
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Factors That Affect Emerging Stock Markets
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Download file to see previous pages Brazil is considered by Europeans as an emerging market and as such, there is considerable potential for market growth. Europeans are looking for emerging markets and among of them are in Asia and Brazil (Nicholson, 2010). It is not only enough that the market is emerging but another consideration taken into account by investors is the market size. Brazil is one of the largest markets and the opportunity can be promising for investors (de la Torre and Schmukler, 2007). Financially speaking, investors are looking for liquidity of the state as far as their will to invest is concerned. In the case of Brazil as an emerging and substantially large market, the repo transaction which has become the basis of liquidity tries to exceed the value traded of the underlying assets (de la Torre and Schmukler, 2007). The potential for diversifying risk by investing in Latin America including Brazil, in particular, is limited (Chen et al., 2002). This implies that Brazil as an emerging market got a great deal of opportunity for investors. With this, the status of its stock market can be considered growing and entices many investors at the same time. Another consideration involves country, regional and global market risks that can contribute to the daily changes in yield spread. In Brazil, the yield spread is driven by global risk and it is also contributed by country risk and this varies with bond maturity (Audzeyeva and Hoppe, 2010).
The cost of capital is another consideration in investment among investors and corporate managers. It was found out that Brazil together with four other Latin American countries like Argentina, Chile, Colombia, and Mexico have significant correlation on their stock market prices from 1992 to 1997 which implies first and second moment time dependencies which further good indicator of cost of capital enticing to investors and corporate managers (Christofi and Pericli, 1999). ...Download file to see next pages Read More
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