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Risk Unrewarded as Emerging Stocks Lag Behind Most Since ’98

The link between risk and reward in stocks is breaking down as emerging markets post the worst first quarter since 2008 and lag behind shares of developed economies by the most in 15 years.

The MSCI Emerging Markets Index’s 3.8 percent drop this year through last week trimmed its rebound from an October 2011 low to 22 percent. That compares with a 33 percent advance for the MSCI World Index and marks the first time since 1998 that developing-country shares have underperformed during a global rally. When adjusted for price swings, emerging market returns are 37 percent smaller than in advanced nations, data compiled by Bloomberg show.