In his analysis, Professor Cremers offers important insight into why some companies in emerging markets have performed so well.
Denver, Co (PRWEB) January 14, 2014
Investment Management Consultants Association® (IMCA®) today named K. J. Martijn Cremers, Professor of Finance, Mendoza College of Business, University of Notre Dame, the winner of the second annual Journal of Investment Consulting Academic Paper Competition.
Cremers’ winning paper, “Emerging Market Outperformance: Publicly Traded Affiliates of Multinational Corporations,” analyzes the strong performance of emerging market affiliates of corporations headquartered in developed countries and offers two main reasons for the outperformance: improving corporate governance and the stabilizing role of the parent companies.
The paper examines overall emerging market stock performance from June 1998 to June 2011, noting that emerging markets significantly outperformed developed markets but with markedly more volatility of equity returns and greater downside volatility.
But a subset of emerging market stocks—publicly traded affiliates (all listed and operating in emerging markets) in which large multinational corporations (all headquartered and mostly also listed in developed markets) have very significant ownership stakes—managed to combine even better performance without greater downside volatility, and in the case of Asian emerging markets, without greater total volatility.
The performance of publicly traded emerging market affiliates of large multinational corporations during the financial crisis was “particularly good, compared to both their local markets and the developed markets, and especially so in Asia,” according to the paper. The paper notes that improved corporate governance and a stabilizing role of the parent companies were critical factors in the financial crises and “seem to provide affiliates a clear comparative advantage over their local competitors that should endure in the foreseeable future.”
“Emerging markets play a critical role in many investment portfolios,” said Margaret M. Towle, PhD, CPWA®, Journal of Investment Consulting editor-in-chief. “In his analysis, Professor Cremers offers important insight into why some companies in emerging markets have performed so well.”
The competition called for papers on topics that examine recent research relevant to investment consulting and private wealth management, and provide a development of theory and applied research on the chosen topic. Papers are invited from academics and doctoral students, with special encouragement to nontenured faculty. The Journal of Investment Consulting editorial advisory board selected the winning paper based on quality and relevancy of the research to investment management consultants and investment advisors.
Over the past 14 years, emerging market stocks have significantly outperformed developed markets, but their strong performance has typically come at the cost of greater volatility. “I wanted to investigate whether it mattered how you invest in emerging markets: directly in local stand-alone companies, through international companies doing significant business in emerging markets, or in their affiliates trading in local markets. My conclusion is that these affiliates seem to provide the best combination of exposure to emerging market growth and developed market governance,” said Cremers. “I’m honored that my research paper is recognized by the Journal of Investment Consulting, and I hope investors are able to benefit from my research.”
Professor Cremers, a native of the Netherlands, joined the University of Notre Dame as Professor of Finance in 2012. Before that, he was on the faculty at Yale School of Management from 2002–2012. He earned a PhD in finance from the New York University Stern School of Business.
The paper will be published in the next issue of the Journal of Investment Consulting due to be published in spring 2014, and Cremers will receive a $5,000 cash award.
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