Can someone please explain this? I cannot find a good description of it. Thanks
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?
The concept of smoothing. Thanks
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…
Ok thanks all