This Week in Emerging Market Volatility – 1/31/2014

Despite being a market sector that underperformed terribly last year, emerging markets got a lot of attention during the first month of 2014.  So far the focus has been on how bad tapering is for emerging economies.  Keep in mind (if there is one thing you learn this weekend this should be it) that stock prices often anticipate news or economic trends.  I can find articles that are almost a year old discussing the negative impact of tapering on emerging markets.  Time will tell if tapering really is that bad for Brazil, China, Russia, and India and the other emerging economies and time will tell how much was priced in to these markets in 2013.  For a quick high level explanation of tapering you can check out a blog I put up last week –

The composite emerging market exchange traded fund, the iShares MSCI Emerging Markets (EEM – 38.19), actually put up a positive day and was only slightly lower on the week last week.  The result was higher emerging market implied volatility with VXEEM rising 2.26%.   The curve (see below) flattened a bit, but is still a bit inverted (backwardation is trader’s speak).


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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…