Cross-Country Differences in Return and Volatility Metrics of World Equity Indices

• Authors: Iskandar Sheraliev , Robert Ślepaczuk

Abstracts

EN

This research seeks to determine whether the cross-country differences in return and volatility metrics in various country equity indices can be explained by differences in economic development. We base the study on the MSCI IMI net income indices on two samples: a 51-country sample from the period 31 May 2002 to 28 February 2022, and a 75-country sample from the period 30 November 2010 to 28 February 2022. In this study, countries are grouped into four categories: frontier, emerging, early-developed, and developed, based on gross domestic product (GDP) per capita. The Kruskal–Wallis rank sum test is used to find cross-group differences, and the results are further analyzed with the pairwise Wilcoxon rank sum test with the Holm–Bonferroni p value adjustment method. The results are relatively unintuitive and show that there is no significant cross-group difference in daily and monthly returns. There is evidence of a considerable difference in volatility metrics, especially in the case of the emerging market group, which is significantly different from the three other groups. The results are slightly sensitive to time period change and very sensitive to changes in income categories of some countries.

Keywords

EN

Frontier markets; Emerging markets; Developed markets; Cross-country differences; Volatility; GDP per capita

• Publisher: Uniwersytet Warszawski. Wydział Nauk Ekonomicznych
• Journal: Central European Economic Journal
• Year: 2022
• Volume: 10
• Issue: 57
• Pages: 91-115

Dates

published

2023

Contributors

author

Iskandar Sheraliev

• University of Warsaw, Quantitative Finance Research Group

author

Robert Ślepaczuk

• University of Warsaw, Quantitative Finance Research Group

• https://orcid.org/0000000152272014

References

• Ali, H. (2019). Does downside risk matter more in asset pricing? Evidence from China. Emerging Markets Review, 39, 154–174.
• Al-Tamimi, H. A. H., Alwan, A. A., & Abdel Rahman, A. (2011). Factors affecting stock prices in the UAE financial markets. Journal of Transnational Management, 16(1), 3–19.
• Amaresh, M., Anandasayanan, S., & Ramesh, S. (2020). Macro-economic variables and stock market performance: Empirical evidence from Colombo stock exchange. Vidyodaya Journal of Humanities and Social Sciences, 20(2), http://dr.lib.sjp.ac.lk/handle/123456789/9147
• Yartey, A. C. (2008). The determinants of stock market development in emerging economies: Is South Africa different? International Monetary Fund, African Dept.
• Amtiran, P., Indiastuti, R., Nidar, S., & Masyita, D. (2017). Macroeconomic factors and stock returns in APT framework. International Journal of Economics and Management, 11(S1), 197–206.
• Ang, A., Chen, J., & Xing, Y. (2006). Downside risk. The Review of Financial Studies, 19(4), 1191–1239.
• Atilgan, Y., & Demirtas, K. O. (2016). Risk-adjusted performances of world equity indices. Emerging Markets Finance and Trade, 52(3), 706–721.
• Cherif, M., & Gazdar, K. (2010). Institutional and macroeconomic determinants of stock market development in MENA region: New results from a panel data analysis. International Journal of Banking and Finance, 7(1), 139–159.
• Dellas, H., & Hess, M. (2005). Financial development and stock returns: A cross-country analysis. Journal of International Money and Finance, 24(6), 891–912.
• Dowd, K. (2005). Measuring market risk (2nd ed.). John Wiley & Sons.
• Estrada, J. (2007). Mean-semivariance behavior: Downside risk and capital asset pricing. International Review of Economics & Finance, 16(2), 169–185.
• Giri, A. K., & Joshi, P. (2017). The impact of macroeconomic indicators on indian stock prices: An empirical analysis. Studies in Business & Economics, 12(1), 61–78. https://doi.org/10.1515/sbe-2017-0005
• Ho, S.-Y., & Iyke, B. N. (2017). Determinants of stock market development: A review of the literature. Studies in Economics and Finance, 34(1), 143–164. https://doi.org/10.1108/SEF-05-2016-0111
• Hollander, M., & Wolfe, D. A. (1973). Nonparametric statistical methods. John Wiley & Sons.
• International Monetary Fund (2021). World economic outlook, October 2021: Recovery during a pandemic-health concerns, supply disruptions, price pressures. International Monetary Fund. https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021
• James, G. A., & Karoglou, M. (2010). Financial liberalization and stock market volatility: The case of Indonesia. Applied Financial Economics, 20(6), 477–486.
• Kalam, K. K. (2020). The effects of macroeconomic variables on stock market returns: Evidence from Malaysia's stock market return performance. Journal of World Business, 55(8), 1–13.
• Martin, P. G., & MacCann, B. B. (1989). The investor's guide to fidelity funds. John Wiley &Sons.
• Montes, G. C., & Tiberto, B. P. (2012). Macroeconomic environment, country risk and stock market performance: Evidence for Brazil. Economic Modelling, 29(5), 1666–1678.
• Osamwonyi, I. O., & Evbayiro-Osagie, E. I. (2012). The relationship between macroeconomic variables and stock market index in Nigeria. Journal of Economics, 3(1), 55–63.
• Pradhan, R. P., Arvin, M. B., Hall, J. H., & Bahmani, S. (2014). Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries. Review of Financial Economics, 23(4), 155–173.
• Singh, T., Mehta, S., & Varsha, M. (2011). Macroeconomic factors and stock returns: Evidence from Taiwan. Journal of Economics and International Finance, 3(4), 217–227.
• Snoussi, W., & El-Aroui, M.-A. (2012). Value-at-risk adjusted to the specificities of emerging markets: An analysis for the Tunisian market. International Journal of Emerging Markets, 7(1), 86–100. https://doi.org/10.1108/17468801211197905
• Umutlu, M., Akdeniz, L., & Altay-Salih, A. (2010). The degree of financial liberalization and aggregated stock-return volatility in emerging markets. Journal of Banking & Finance, 34(3), 509–521.

Identifiers

DOI

10.2478/ceej-2023-0006

Biblioteka Nauki

2200545