Summarizes the characteristics of financial markets in developing countries, posing eight questions about them. Defines developing countries, and pinpoints those with stock markets, principally those with a good risk index score and a comparatively high growth rate as well as higher income levels. Explains the method of comparing risk and return factors, finding that emerging markets have only marginally higher returns but very much more volatility than developed ones. Traces capital market differences to fundamental macroeconomic differences, concluding that country income classification is the best predictor of a functioning stock market, and that macroeconomics can explain 40 per cent of the variability in capital markets data.
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