ABSTRACT
Almost by definition, emerging market economies are characterized by limited information on business operating conditions and economic prospects. Under conditions of limited public information, private information can be extremely valuable and can lead, in turn, to correlation and/or persistence in investor behavior.1 This chapter is motivated by the following empirical questions. Is privately acquired information important in the decision to undertake foreign investments in emerging market economies? If so, is the private information acquired mainly through direct experience, that is, through the firm’s own investment in the country? Or is potential for economic returns inferred from actions undertaken by others who may have private information? What is the relationship between private information and publicly available information on a country? Finally, can correlated investment outcomes generated by private information be distinguished from those generated by industrial agglomerations or by strategic behavior of investors?
