If you’re looking to diversify your portfolio, you need to consider emerging markets, says Peter Christoffersen, professor of finance with the Rotman School of Management.
The past 10 to 15 years have brought a major shift in market correlations, with the correlations between developed markets rising dramatically—from approximately 40% a decade ago to close to 80% today.
This presents “a dramatic shift for portfolio managers who are trying to minimize risk by diversifying across countries,” says Christoffersen.
However, he adds, there is some good news. “The correlations between developed and emerging markets are also going up, but they’re still at a much lower level than correlations between one developed market and another.”
Watch the video to find out what else Christoffersen had to say about emerging markets.