A political risk is related to political decisions and political environment development, and is one of the main risks when investing in emerging markets. Developed markets also contain political risk, but there political risk is significantly lower.
It is hard to measure political risk exactly because occasions of political risk manifestation are rear. However, this type of investment risk cannot be ignored, because it may have dramatic effect on value of investments. For example, if some totalitarian regime would decide to nationalize all private assets or would limit all capital outflows from the country, it would inevitably impact all foreign investors.
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