I'm not sure about China as it might be too corrupt for passive investing to work.
That's an interesting offhand comment. Does that imply that EMH doesn't apply to financial assets in corrupt economies, specifically to external (foreign) investors who can come and leave as they want?
Also, while China's official economic numbers are highly suspect (see e.g. this), it looks very likely that it is one of the three world's biggest economies (along with USA and EU). Can a passive investor afford to ignore it?
To help mitigate the currency risk of investments?
Well, it doesn't mitigate the risk, it just partially avoids it. You are right in that investing in foreign countries brings with it FX risk and while it's easy to hedge a lot of people are not going to bother.
Another interesting thing here is that the currency markets do not fall under EMH, both empirically (they are clearly not a random walk) and theoretically (the preconditions for EMH do not hold).
Another interesting thing here is that the currency markets do not fall under EMH, both empirically (they are clearly not a random walk) and theoretically (the preconditions for EMH do not hold).
Can you please elaborate on that? Do you mean the prices themselves are not a random walk or do you mean the prices are not a random walk after adjusting for interest rate differences?
And what preconditions don't hold for currency markets?
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