ABSTRACT
This chapter addresses the characteristics of international financial markets that are prone to market fluctuations. It discusses the brand name effect and the negativity bias and their influence on market perceptions. The chapter discusses the role of domestic political and international institutions in influencing investors' perceptions in this context. It also explains the role of sovereign credit ratings as a means of estimating sovereign credibility. With the expansion of bond markets in developing countries, emerging market debt has become a separate category of investment. Foreign investors, especially foreign private investors, tend to be a significant source of market volatility, especially in times of economic difficulties, given the diversity of assets they invest in. Political risk always ranks as one of the most important risks associated with foreign investment in developing countries. The brand name effect suggests that a party's label influences international investors' perceptions regardless of what policies the party actually pursues.
