Appetite for Risk in Emerging Stock Markets

Abstract

Based on qualitative empirical research, we examine the extent to which Central European emerging stock markets were affected by the recent international financial crisis, and how the current investment climate influences investments in Polish equities. We find that global financial crisis induced changes to domestic and international investors’ appetite for risk related to equity investments in emerging stock markets: (i) investors are more prudent about emerging markets but Warsaw stock exchange still shows substantial growth potential and positively distinguishes itself among other Central European stock exchanges; (ii) capital market practitioners’ feel that the risks attached to investing in the Warsaw stock exchange have evolved but have at their disposal tools to manage said risks; (iii) emerging markets equities are an attractive component of the international portfolio diversification, provided trading strategies are adjusted to the contemporary investment environment. With insights from practitioners we also contribute to the international debate on investor protection and regulations that can improve the investment processes.