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The pricing of emerging market assets is thought to principally reflect changes in global sentiments and country risk. In turn, country risk is a reflection of a lack of sufficient information, agency problems (inability of a foreign lender to monitor a distant borrower), and sovereign risk. For these reasons, it is generally believed that foreign investors and lenders will tar all operations within a country with the same brush. Exceptions are known to exist - firms with strong "Hard" currency earnings escape the country embrace. Yet the evidence on the importance of country-level factors in emerging markets asset pricing is considerable.
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