Good Essay On Analyzing Country Risk

Country Risk is associated with the sovereign risk of a country where the economic or political factors may affect the investment returns of the investor. Below discussed are few methods to access the country risk:

Quantitative Analysis

In order to access the country risk, analysts use statistical methods such as Debt to GDP Ratio and Beta Coefficient of the MSCI Index of a particular country. All these numbers are readily available on financial rating magazines and websites like Tradingeconomies.com.

Country Credit Survey

This credit rating survey is widely used by the institutional investors around the world as the final outcome is based on survey conducted by senior economists and analysts at large investment banks. In view of many institutional investors, in order to access the country risk, these surveys are the most appropriate resources as they are embedded with large amount of creditability as major investment banks express their views only after conducting due diligence and extensive research .

Economic Intelligence Unit(EIU)

This is another unit that collects information on the sovereign risk of around 100 nations with particular focus on ‘’emerging and indebted markets’’. The major advantage of these ratings is that they are updated on monthly basis and hence all the latest trends are included in their ratings for each nation. In addition, the format of rating is also investor-friendly that only provides outlook for the country as well as two-year forecasts for many key variables.

Conclusion

Of the above discussed methods, the ratings issued by EIU seems more comprehensive where updated trend and easy to analyze statistics will facilitate the investors in reaching a quick overview for the country risk. In addition, it is research arm of ‘’The Economist’’ and this largely adds to its creditability.

References

3 Ways You Can Evaluate Country Risk. (n.d.). Retrieved January 7, 2014, from Investopedia: How to Evaluate Country Risk
Kuepper, J. (n.d.). How to Evaluate Country Risk. Retrieved January 7, 2014, from http://internationalinvest.about.com/od/researchingglobalstocks/a/How-To-Evaluate-Country-Risk.htm