Sunday, October 07, 2007
Emerging market stocks have been reaching new highs almost everyday (see this article in the Economist magazine), and the natural resource sector has been on a tear as well. Given the giddy valuations of both sectors, which one is a better relative buy at this point? For those of you who have been following the IGE-EEM spread that I proposed before, its value is at an all-time-low these days -- it was at -6.77 standard deviations. Given their historical cointegration, I wouldn't be surprised if it will revert to a more sane value in the near future.
Posted by Ernie Chan at 9:30 AM