you need me to explain emerging markets? or the concept of smoothing? or why smooth emerging market returns? or do you have a question about returns? or how to smooth emerging market returns? when to smooth?
what would you like to know?
Smoothing generally means taking a long time period to make data less volatile. For example: if you do rolling 1 year returns you’ll see pretty big fluctuations. If you did periods of 3 years the data would look less volatile. If you did 5 years it would look even less volatile. So risk is decreasing.
Advantage to this is the data is easier to interpret and more consistent.
Disadvantage is you are understating risk.
*smoothing in private real estate may be a little different, that’s usually because data is lagged.
I’ve never come across smoothing as an issue for emerging markets….only for illiquid assets where current fair market values aren’t readily available..
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