Is the risk of market crash in an emerging economy

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In the summer of 1998, Russia suffered a currency and stock market crisis that drove the dollar value of Russian stocks down to 10% of their pre-crash value. The crash caught many investors by surprise, including hedge fund managers specializing in emerging markets. In response to large losses sustained on Russian investments, one hedge fund manager was quoted as saying: "If Russia had taken over a plant belonging to General Motors, the (U.S.) government would have done something about it. ..Essentially the Russian government has confiscated Western capital, and nobody is doing anything about it." Is the risk of a market crash in an emerging economy a political or a financial risk? Explain.

Reference no: EM131616088

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