2  BIS Review 58/2007  •  Improved market liquidity, reflecting a host of different factors, such as development of market infrastructure, broadening of investor base, and more prudent macroeconomic policies in many emerging market countries, has reduced liquidity risk premia.
•  More prevalent use of portfolio diversification has increased demand for assets that have relatively high unsystematic risk, pushing down the price of idiosyncratic risks in many asset categories (e.g. equities and sovereign debt). This is reflected especially in emerging markets.