REG CROWDER

Do Emerging Market ETFs Really Help You Diversify?

HOWEVER, A RECENT "IMF WORKING PAPER" CONCLUDES THAT SIGNIFICANT DECOUPLING (DIVERGENCE) TOOK PLACE BETWEEN 1985 AND 2005.

I get into this decoupling versus convergence thing in my Google Knol entitled, "International Investing." If you're curious, this is the URL:

knol.google.com/k/reg-...

The article includes a link that will allow you to download the entire IMF working paper as a PDF file at no charge.

This is the precise information you will need to make sure you get the correct document: IMF Working Paper No. WP/08/143, "Global Business Cycles: Convergence or Decoupling?" June 2008. Prepared by M. Ayhan Kose, Christopher Otrok and Eswar S. Prasad. Authorized for distribution by Stijn Claessens.

Here is a brief portion of the abstract:

"Our main result is that, during the period of globalization (1985-2005), there has been some convergence of business cycle fluctuations among the group of industrial economies and among the group of emerging market economies. Surprisingly, there has been a concomitant decline in the relative importance of the global factor. In other words, there is evidence of business cycle convergence within each of these two groups of countries but divergence (or decoupling) between them."

I suspect the sudden explosion of interest in "frontier" funds represents an effort to gain exposure to that decoupling.

REG CROWDER
Freelance Financial and Investment Writer

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