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Risk-adjusted performances of world equity indices

Atılgan, Yiğit and Demirtaş, K. Özgür (2012) Risk-adjusted performances of world equity indices. [Working Paper / Technical Report] Sabanci University ID:10.5900/SU_SOM_WP.2012.19397

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Abstract

This paper investigates whether equity indices of 24 emerging and 28 developed markets compensate their investors equally after taking risk into account. We place special emphasis on downside risk by calculating both nonparametric and parametric value at risk. We find that when all 52 markets are ranked based on their alternative reward-to-risk ratios, almost all of the countries in the top quartile are emerging markets whereas almost all of the countries in the bottom quartile are developed markets. These results are supported by the finding that pooled means of the reward-to-risk ratios are significantly higher for emerging markets compared to those of developed markets. Focusing on the period after the initiation of the recent financial crisis reveals that, although both developed and emerging markets suffered in terms of generating higher returns per unit risk, emerging markets continued to outperform developed markets and the outperformance became more pronounced.

Item Type:Working Paper / Technical Report
Uncontrolled Keywords:risk-return relationship, downside risk, value-at-risk, emerging markets, 2008 financial crisis
Subjects:H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
ID Code:19397
Deposited By:Yiğit Atılgan
Deposited On:22 Oct 2012 17:19
Last Modified:21 Nov 2014 22:59

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