Explain the risks particular to holding emerging market equities

Equity investors in emerging markets face governance and institutional risks on top of market volatility. Minority shareholder protection may be weak, ownership is often concentrated in families or the state, and controlling holders can extract value through related-party dealings. Accounting and disclosure standards may be looser, capital controls can restrict repatriation, and political intervention can change the rules for whole sectors. Currency risk adds to return volatility, and liquidity can vanish in stress. In expected return models, lower integration with global markets argues for a higher risk premium, often estimated by blending integrated and segmented Singer–Terhaar premiums. The trap is to treat higher expected growth as higher expected equity return without allowing for dilution and governance.