CLUSTER ANALYSIS OF MARKET POTENTIAL IN EMERGING MARKETS: A DYNAMIC RESEARCH BASED ON MARKOV CHAIN

The emerging economy is playing an important role in the global market. Market potential of emerging markets is also a determinant in a wide range of market decisions of the global managers. For the reason that the market potential consists of a number of different factors across different countries, this research divides the emerging market countries into different clusters, and analyzes their different attributes by cluster analysis. Also, the network relationships between the emerging markets and their attributes across different clusters are further researched. It is found that countries at a higher level of market potential also show a higher level of economic freedom, commercial infrastructure, market intensity and market consumption capacity. With the development of their economies, the emerging markets have experienced different transitions. This research further estimates the switching probabilities across different clusters by a Markov chain model. Future ratios of different country clusters in the emerging markets are also forecasted. This research will be helpful to the global managers and cross-border investors in developing a further understanding of future changes in market potentials of different emerging markets.