Factors considering before investing
Being an investor, what are all factors you would consider before investing within the emerging stock market of developing country?
Expert
An investor in the emerging market stocks required to be concerned with the depth of market and also with the market’s liquidity. Where, depth of market refers to the opportunities in order to invest within the country. One measure of depth of the market is concentration ratio of the country’s stock market. Consequently, concentration ratio is calculated to display the market value of ten largest stocks traded as a fraction of the total market capitalization of all equities traded. The lower the concentration ratio, the less deep is the market. This means that, most value is concentrated only in few companies. While this does not essentially states that the largest stocks in emerging market are not good investments, Though, it suggest that there exist few opportunities for investing in that country and that proper diversification in the country may become difficult. In accordance with the liquidity, an investor might be wise to examine the market turnover ratio of the country’s stock market.
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