Frontier Emerging Equity Markets Securities Price Behavior and Valuation

1. Front Matter

   Pages i-xv

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2. Introduction

   Pages 1-16

3. Market Efficiency in Frontier Emerging Markets

   Pages 17-47

4. Frontier Emerging Equity Market Infrastructure

   Pages 49-69

5. Data and Descriptive Features of a Frontier Equity Market

   Pages 71-82

6. Information Channels in Frontier Emerging Markets

   Pages 83-93

7. Econometrics of Measuring Frontier Equity Market Efficiency

   Pages 95-108

8. Running the Numbers on a Frontier Market

   Pages 109-118

9. ADRs and GDRs - International Depository Receipts in Frontier Markets

   Pages 119-145

10. Valuation Approaches to Frontier Equity Markets

    Pages 147-177

11. The Philology of Frontier Equity Markets

    Pages 179-190

12. Back Matter

    Pages 191-201

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Frontier Emerging Equity Markets Securities Price Behavior and Valuation uses the Russian example to illustrate the intricate mechanics of frontier emerging equity market analysis. Frontier markets are those equity markets that do not benefit from the same degree of securities transparency and information dissemination as future emerging markets. In many cases, frontier equity markets are those which have been created almost literally overnight, without the infrastructure and institutional readiness of the nations in which they are located. During the 1990s, frontier emerging markets have formed a new investment asset class which requires a very different set of valuation metrics from mature emerging markets.
In developing a multi-stage approach to the understanding and valuing of such markets, this book uses the case of the Russian frontier equity market to illustrate topics such as the relationship between equity market infrastructure and valuation during the `genesis' period of an emerging financial market; evolving market efficiency; and the crucial role of depository receipt programs in the development of these markets. Further, this book develops the first comprehensive framework for valuing a frontier equity market. The role of equity risk premium, as it affects early dynamic equity valuation, is also covered in order to illuminate important drivers of securities price performance. The book closes by discussing the philology of the frontier market valuation debate, in which every market participant is an important purveyor of information and a contributor to the final valuation dimension of equities.
The main asset used to present the empirical concepts is a complete research database drawn from actual frontier market investing, which previously had been unavailable to academic researchers. As an active institutional asset management professional at a major Wall Street investment firm, the author marries academic theories, such as market efficiency and market segmentation, to the real world of high stakes and high risk frontier market investing. This book illustrates the applicability and, in some cases, the uselessness of financial theory when applied to this new and rising asset class. It opens the discussion of equity valuation theory for an environment where many conventional rules of asset price determination need to be rewritten. As the first research-level monograph exclusively dedicated to frontier emerging equity market analysis, it offers a unique dual perspective on how academic financial research finds it a complementary and sometimes antagonistic counterpart of real-life investment decision-making. This book can help both professional investors and students of finance to understand frontier equity market valuation and development.

• Asset Management
• Finance
• Investment
• development
• efficiency
• emerging markets
• management
• valuation

German-born, and educated in Frankfurt, Prague and Cambridge, Oliver Kratz completed a PhD specializing in international finance, market segmentation and pre-emerging equity markets. Dr Kratz currently works as an international equity analyst at a major Wall Street firm in New York. His responsibilities encompass Eastern European, Mediterranean, Middle Eastern and African equity markets as well as the global chemicals, metals, mining, steel and global semiconductor sectors. Dr Kratz has been quoted on issues pertaining to international banking and financial markets in the Frankfurter Allgemeine Zeitung and the Wall Street Journal.

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