Sample interview questions: How do you evaluate the potential risks and returns of investing in emerging markets?
Sample answer:
Evaluating Potential Risks and Returns in Emerging Markets
1. Political and Economic Stability:
- Assess political stability, rule of law, and adherence to international norms.
- Evaluate macroeconomic indicators (GDP growth, inflation, interest rates) to gauge economic resilience.
- Monitor geopolitical events and their potential impact on investment environment.
2. Currency Risks:
- Understand currency exchange rates and their volatility.
- Evaluate the stability of local currencies and the potential for fluctuations.
- Consider hedging strategies to mitigate currency risks.
3. Market Volatility:
- Emerging markets often exhibit higher volatility than developed markets.
- Assess historical price movements, average daily volume, and market capitalization to gauge market depth and liquidity.
- Diversify investments across multiple companies and sectors to reduce volatility.
4. Regulatory and Legal Risks:
- Review regulations governing foreign investment and ownership.
- Assess the enforcement of laws and regulations, including intellectual property rights and investor protections.
- Seek legal advice to ensure compliance and pro… Read full answer