In this episode we discuss the issue with AQR's Dan Villalon, who has authored two research papers that use a data driven approach to look at it. We discuss the current valuations in both international and emerging market stocks and the opportunity they may present for long-term investors. We also discuss the foundational arguments for international diversification and whether they hold up today.
#emergingmarketinvesting
03:06 - Dan's experience as a winemaker
05:04 - The similarities between winemaking and investing
06:37 - The difference between expensive and inexpensive wine
09:30 - Dan''s experience hosting the Curious Investor podcast
11:59 - The current state of international investing
13:49 - Where AQR comes up with their research paper titles
15:07 - When successful long-term investing strategies stop working
18:35 - Do intangible assets help explain the gap between US and International valuations?
19:27 - Do US companies provide enough diversification through their international exposure?
22:49 - The different types of bear markets
24:14 - The current valuation of emerging markets
25:20 - Do fundamentals justify current emerging market valuations?
28:23 - How to think about political risk in Emerging Markets?
31:37 - Putting current emerging market valuations in historical context
33:02 - Thinking through some of the reasons for the valuation gap between the US and Emerging Markets
37:32 - The opportunity for active investors in emerging market value
40:28 - Long-short strategy portfolio construction
45:00 - The challenges of tracking error
50:00 - Macro uncertainty and value
55:04 - The one lesson Dan would teach the average investor
DAN"S PAPER ON INTERNATIONAL DIVERSIFICATION
https://www.aqr.com/Insights/Research/Journal-Article/International-Diversification-Still-Not-Crazy-after-All-These-Years
DAN"S PAPER ON EMERGING MARKETS
https://www.aqr.com/Insights/Research/White-Papers/ReEmerging-Equities
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This podcast does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of AQR. The views expressed reflect the current views as of the date hereof and neither the author nor AQR undertakes to advise you of any changes in the views expressed herein.