International Capital Markets

and Investment Practice

Part 2
Risk and return on capital markets

Dr. Peter Oertmann

[email protected]

This lecture is largely congruent in content with the video

recording of the 2020 lecture available on lecturio.de
Part 2: Risk and return on capital markets

Brush-up: Calculating risk and return

Capital market returns: A long-term perspective
Some facts on stock market volatilities and correlations
Case: Analyzing 25 years of stock market returns

© 2018-2022 Peter Oertmann 2

Part 2: Positioning in the lecture

Major fields in asset management Knowledge base

Diversification Asset allocation Stylized facts on Sources of risk

global markets and return
Empirical research Models and empirical
research

Security Investment Asset pricing Portfolio

selection strategy Theories, models and construction
empirical tests
implementation Models and empirical
tests

Risk Trading and Financial Time series

management execution economics analysis
Models and empirical Models and empirical
research procedures

© 2018-2022 Peter Oertmann 3

Part 2: Risk and return on capital markets

Brush-up: Calculating risk and return

Capital market returns: A long-term perspective
Some facts on stock market volatilities and correlations
Hands-on: Analyzing 25 years of stock market returns

© 2018-2022 Peter Oertmann 4

Performance of US equity from January 1990 to March 2022

S&P 500 Index (USD)

10.000

9.000

8.000
Yearly averages S&P 500 GTR S&P 500 Price
7.000
Log return 9,99% 7,91%
6.000

Simple return 10,51% 8,23%

5.000

4.000 Volatility 14,67% 14,68%

3.000

2.000

1.000

0
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22

S&P 500 GTR S&P 500 Price

Source: Own calculations, data: S&P500.xlsx

© 2018-2022 Peter Oertmann 5

Performance of US equity from January 2020 to March 2022

S&P 500 GTR log

15%

12,1%

10,4%
10%

6,9% 6,8%
5,5% 5,2%
4,7%
5% 3,8%
4,3% 4,4%
3,6%
2,7% 3,0%
2,0% 2,3% 2,3%

0,7%

0%
0,0%
-1,0% -0,7%

-2,7% -3,0%
-3,9%
-5% -4,8%
-5,3%

-8,6%
-10%

-13,2%
-15%
J-20 F-20 M-20 A-20 M-20 J-20 J-20 A-20 S-20 O-20 N-20 D-20 J-21 F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 O-21 N-21 D-21 J-22 F-22 M-22

Source: Own calculations, data: S&P500.xlsx

© 2018-2022 Peter Oertmann 6

Calculating returns

Time period Example

S&P 500, monthly returns
t-1 t
15%

10%

Simple return 5%

Pit - Pi, t -1
Rit =
0%

Pi, t -1
-5%

Continuously compounded return

-10%

æ P ö
Rit = lnçç it ÷÷ -15%
J-19 M-19 M-19 J-19 S-19 N-19 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22

è Pi, t -1 ø
Average return per year:
22.1% (simple)
Source: Own calculations, data: S&P500.xlsx
19.9% (continuously compounded)

© 2018-2022 Peter Oertmann 7

Calculating returns (cont.)

Example: S&P 500 GTR, monthly returns, log vs. simple

2019 log simple 2020 log simple 2021 log simple 2022 log simple

Jan-19 7,71% 8,01% Jan-20 -0,04% -0,04% Jan-21 -1,01% -1,01% Jan-22 -5,31% -5,17%

Feb-19 3,16% 3,21% Feb-20 -8,59% -8,23% Feb-21 2,72% 2,76% Feb-22 -3,04% -2,99%

Mar-19 1,92% 1,94% Mar-20 -13,18% -12,35% Mar-21 4,29% 4,38% Mar-22 3,65% 3,71%

Apr-19 3,97% 4,05% Apr-20 12,06% 12,82% Apr-21 5,20% 5,34%

May-19 -6,57% -6,35% May-20 4,65% 4,76% May-21 0,70% 0,70%

Jun-19 6,81% 7,05% Jun-20 1,97% 1,99% Jun-21 2,31% 2,33%

Jul-19 1,43% 1,44% Jul-20 5,49% 5,64% Jul-21 2,35% 2,38%

Aug-19 -1,60% -1,58% Aug-20 6,94% 7,19% Aug-21 3,00% 3,04%

Sep-19 1,85% 1,87% Sep-20 -3,87% -3,80% Sep-21 -4,76% -4,65%

Oct-19 2,14% 2,17% Oct-20 -2,70% -2,66% Oct-21 6,77% 7,01%

Nov-19 3,57% 3,63% Nov-20 10,39% 10,95% Nov-21 -0,70% -0,69%

Dec-19 2,97% 3,02% Dec-20 3,77% 3,84% Dec-21 4,38% 4,48%

Source: Own calculations, data: S&P500.xlsx

© 2018-2022 Peter Oertmann 8

Exercise question

On 23 March 2020, shortly after the start of the Covid-19 pandemic, Apple's share
price (NASDAQ: AAPL) was quoted at USD 56.09. One year later on 23 March
2021, the price was USD 122.54. Calculate the difference between the simple and
the continuously compounded return.

© 2018-2022 Peter Oertmann 9

Measuring investment risk

Variance of return Example

§ Measure of dispersion S&P 500, monthly returns, 2019 to date
§ Mean squared deviation of returns form 15%

the mean return

10%

1 T
5%

s2i = Var(Ri ) = × å (Rit - Ri )2

T t =1 0%

Volatility -5%

Square root of variance -10%

-15%
J-19 M-19 M-19 J-19 S-19 N-19 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22

1 T
si = Std(Ri ) = × å (Rit - Ri )2 Volatility:
T t =1
17.18% (yearly)
Source: Own calculations, data: S&P500.xlsx
4.96% (monthly)

© 2018-2022 Peter Oertmann 10

Measuring investment risk (cont.)

Volatility from different perspectives

Transformation rules Volatility calculations
(daily volatility) ´ Ö(22 days) Yearly Monthly Daily
= (monthly volatility) 100.0% 28.9% 6.2%
(monthly volatility) ´ Ö(12 months) 80.0% 23.1% 4.9%
= (yearly volatility) 60.0% 17.3% 3.7%
50.0% 14.4% 3.1%
40.0% 11.5% 2.5%
30.0% 8.7% 1.8%
20.0% 5.8% 1.2%
15.0% 4.3% 0.9%
10.0% 2.9% 0.6%

© 2018-2022 Peter Oertmann 11

Calculating portfolio returns

Approach
§ Weighting the returns of portfolio components (single assets)
§ Using simple (!) returns, not continuous returns

Two asset case

Rpt = w 1 × R1t + w 2 × R2 t Mean: Rp = w 1 × R1 + w 2 × R2

N (many) asset case

N N
Rpt = å w i × Rit Mean: Rp = å w i × Ri
i =1 i =1

© 2018-2022 Peter Oertmann 12

Measuring the risk of a portfolio

Starting point
§ Simple weighting of the variances / volatilities of the portfolio components is not
adequate
§ Return covariances have to be taken into account

Portfolio variance

2 asset case sp2 = w12 × s12 + w 22 × s22 + 2 × w1 × w 2 × s12

3 asset case sp2 = w12 × s12 + w 22 × s22 + w 32 × s32

+ 2 × w1 × w 2 × s12 + 2 × w1 × w 3 × s13 + 2 × w 2 × w 3 × s23

© 2018-2022 Peter Oertmann 13

Measuring the risk of a portfolio (cont.)

General formula of portfolio variance

és11 s12 s13 "ù éw 1 ù

ês s s ú êw ú
Matrix notation s2p = w ' V w = [w 1 w 2 w 3 "] ê 21 22 33 ú ê 2 ú
ês31 s32 s33 ú êw 3 ú
ê úê ú
ë! û ë! û

where w portfolio weight of an asset

sii asset variance
sij covariance between two assets

N N
‚Double-sum‘ notation s2p = å å w i × w j × sij
i =1j =1

© 2018-2022 Peter Oertmann 14

Measuring the risk of a portfolio (cont.)

Crucial insights Covariances dominate

§ Portfolio risk is based on the
variances of its components as well Number of ...
as on the covariance between its Assets VAR‘s COV‘s
components
2 2 2
§ Covariances between the portfolio
components contribute the largest 3 3 6
part to portfolio risk 4 4 12
5 5 20
10 10 90
100 100 9900
1000 1000 999000
2500 2500 6247500

© 2018-2022 Peter Oertmann 15

Exercise question

The volatility of the S&P500 (US stock market) is 14.29% and the volatility of the
Nikkei (Japanese stock market) is 20.03%. The correlation between the two stock
markets is 0.56. Calculate the volatility of a portfolio with 40% invested in S&P500
and 60% invested in Nikkei.

© 2018-2022 Peter Oertmann 16

Part 2: Risk and return on capital markets

Brush-up: Calculating risk and return

Capital market returns: A long-term perspective
Some facts on stock market volatilities and correlations
Hands-on: Analyzing 25 years of stock market returns

© 2018-2022 Peter Oertmann 17

Relative sizes of world stock markets
end-1899 end-2010
45%
UK 30,5% 8,1%
USA 19,3% 41,4% 40%
France 14,3% 3,9% end-1899
35%
Germany 6,9% 3,2% end-2010
Japan 4,0% 8,2% 30%
Canada 1,8% 4,1%
Russia 3,9% 25%

Belgium 3,8%
20%
Austria-Hungary 3,5% 5,2%
Netherlands 1,6% 15%
Italy 1,6%
10%
Australia 3,4%
Switzerland 3,0% 5%
5,1%
Spain 1,4%
Sweden 1,3% 0%
UK USA France Germany Japan Canada
Others 3,7% 16,8%

Data source: Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists, 2002; Credit Suisse AG, 2011; own calculations

© 2018-2022 Peter Oertmann 18

Sector weightings within US stock market
US Sectors Weight
70%
end-1899 end-2000
Railroads 62,8% 0,2%
60%
Banks and Finance 6,7% 12,9% end-1899

Mining 0,0% 0,0%

50% end-2000
Textiles 0,7% 0,2%
Iron, Coal, Steel 5,2% 0,3%
40%
Breweries and Distillers 0,3% 0,4%
Utilities 4,8% 3,8%
30%
Telegraph and Telephone 3,9% 5,6%
Insurance 0,0% 4,9%
20%
Other Transport 3,7% 0,5%
Chemicals 0,5% 1,2%
10%
Food Manufacturing 2,5% 1,2%
Retailers 0,1% 5,6%
0%
Tobacco 4,0% 0,8%

Mining

Chemicals
Other Transport
Telegraph and

Insurance

Tobacco

Sectors that were

Retailers
Banks and Finance

Breweries and

Food Manufacturing
Railroads

Textiles

Iron, Coal, Steel

Utilities

Telephone

small in 1900
Distillers
Sectors that were small in 1900 4,8% 62,4%

Data source: Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists, 2002

© 2018-2022 Peter Oertmann 19

Returns and risk
of international stock and fixed income markets from 1900 to 2010
Real return Nominal return Standard deviation
Equities Bonds Bills Equities Bonds Bills Equities Bonds Bills
North America
USA New York Stock Exchange, est. 1792 6,3% 1,8% 1,0% 9,4% 4,8% 3,9% 20,3% 10,2% 4,7%
Canada Toronto Stock Exchange, est. 1861 5,9% 2,1% 1,6% 9,1% 5,2% 4,7% 17,2% 10,4% 4,9%
Europe (Eurozone)
Belgium Brussels stock exchange, est. 1801 2,5% -0,1% -0,3% 8,0% 5,2% 5,0% 23,6% 12,0% 8,0%
Finland Helsinki Stock Exchange, est. 1912 5,4% -0,2% -0,5% 13,1% 7,1% 6,8% 30,3% 13,7% 11,9%
France Paris stock exchange dates back to 1724 3,1% -0,1% -2,8% 10,5% 7,1% 4,2% 23,5% 13.0% 9,6%
Germany German stock exchange dates back to 1685 3,1% -1,9% -2,4% 8,3% 2,8% 2,3% 32,2% 15,5% 13,2%
Ireland Stock exchanges in Dublin and Cork date back to 1793 3,8% 0,9% 0,7% 8,2% 5,2% 5,0% 23,2% 14,9% 6,7%
Italy Stock exchange in Milan dates back to 1808 2,0% -1,7% -3,6% 10,6% 6,7% 4,5% 29,0% 14,1% 11,5%
Netherlands Amsterdam stock exchange dates back to 1611 5,0% 1,4% 0,7% 8,0% 4,4% 3,6% 21,8% 9,4% 5,0%
Spain Madrid Stock Exchange, est. 1831 3,6% 1,3% 0,3% 9,6% 7,2% 6,2% 22,3% 11,8% 5,9%
Europa (Others)
Denmark Copenhagen Stock Exchange, est. 1808 5,1% 3,0% 2,3% 9,2% 7,1% 6,2% 20,9% 11,7% 6,0%
Norway Oslo Stock Exchange, est. 1819 4,2% 1,7% 1,2% 8,1% 5,5% 4,9% 27,4% 12,2% 7,2%
Sweden Stockholm Stock Exchange, est. 1863 6,3% 2,4% 1,9% 10,1% 6,1% 5,5% 22,9% 12,4% 6,8%
Switzerland Swiss stock markets date back to 1850 4,2% 2,1% 0,8% 6,6% 4,5% 3,1% 19,8% 9,3% 5,0%
UK Stock trading dates back to 1698 5,3% 1,4% 1,0% 9,5% 5,4% 5,0% 20,0% 13,7% 6,4%
Asia-Pacific
Australia Australian Securities Exchange (ASX), est. 1861 7,4% 1,5% 0,7% 11,6% 5,4% 4,6% 18,2% 13,2% 5,4%
Japan Tokyo stock exchange, est. 1878 3,8% -1,1% -1,9% 11,1% 5,8% 5,0% 29,8% 20,1% 13,9%
New Zealand New Zealand Exchange dates back to 1870 5,8% 2,0% 1,7% 9,8% 5,8% 5,5% 19,7% 9,0% 4,7%
Africa
South Africa Johannesburg stock exchange (JSE), est. 1887 7,3% 1,8% 1,0% 12,6% 6,8% 6,0% 22,6% 10,4% 6,2%

World GDP-weighted indices, denominated in USD 5,5% 1,6% 1,0% 8,6% 4,7% 3,9% 17,7% 10,4% 4,7%

Data source: Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists, 2002; Credit Suisse AG, 2011; Wikipedia; own calculations

© 2018-2022 Peter Oertmann 20

Real returns
of international stock and fixed income markets from 1900 to 2010
8%

6%

4%

2%

0%

-2%

-4%
USA CAN BEL FIN FRA GER IRE ITA NET SPA DEN NOR SWE SWI UKI AUS JAP NZE SAF WRL

Equities Bonds Bills

Data source: Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists, 2002; Credit Suisse AG, 2011; own calculations

© 2018-2022 Peter Oertmann 21

Standard deviations
of international stock and fixed income markets from 1900 to 2010
35%

30%

25%

20%

15%

10%

5%

0%
USA CAN BEL FIN FRA GER IRE ITA NET SPA DEN NOR SWE SWI UKI AUS JAP NZE SAF WRL

Equities Bonds Bills

Data source: Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists, 2002; Credit Suisse AG, 2011; own calculations

© 2018-2022 Peter Oertmann 22

Equity risk premiums of international stock markets
Equity risk premium vs. bonds
7,0%
1900-2010 1961-2010 2001-2010
North America
USA 4,4% 2,6% -3,9%
6,0%
Canada 3,7% 1,7% -0,9%
Europe (Eurozone)
Belgium 2,6% 1,0% -4,7%
5,0%
Finland 5,6% 4,6% -7,3%
France 3,2% -0,9% -6,0%
Germany 5,4% -0,1% -4,3%
4,0%
Ireland 2,9% 3,5% -6,2%
Italy 3,7% -1,9% -7,3%
Netherlands 3,5% 3,3% -7,1%
3,0%
Spain 2,3% 3,4% 1,3%
Europa (Others)
Denmark 2,0% 1,2% 0,9%
2,0%
Norway 2,5% 2,8% 3,1%
Sweden 3,8% 4,8% 0,3%
Switzerland 2,1% 2,1% -4,2%
1,0%
UK 3,9% 3,4% -1,3%
Asia-Pacific
Australia 5,9% 3,5% 2,7%
0,0%
Japan 5,0% -1,4% -5,2%

Norway
Italy

Switzerland
Sweden

New Zealand
Belgium

UK
USA

Germany
Canada

Finland

France

Ireland

Netherlands

Spain

Australia

Japan
Denmark

South Africa
New Zealand 3,8% 2,2% 1,1%
Africa
South Africa 5,5% 6,9% 5,8%

1900-2010
World 3,8% 1,2% -4,0%

Data source: Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists, 2002; Credit Suisse AG, 2011; own calculations

© 2018-2022 Peter Oertmann 23

Stock-bond correlations (since 1900)
rolling over a window of 60 months for real returns

Bonds =
save haven

Inflation
accelerating
Bonds =
save haven

Data source: Credit Suisse Global Investment Returns Yearbook 2011, Credit Suisse AG

© 2018-2022 Peter Oertmann 24

Stock-bond correlations
over various time horizons for real returns

Data source: Credit Suisse Global Investment Returns Yearbook 2011, Credit Suisse AG

© 2018-2022 Peter Oertmann 25

Stock-bond correlations (since 1987)
rolling over a window of 12 months for daily nominal returns

0,80

0,60

0,40

0,20

0,00

-0,20

-0,40

-0,60

-0,80
Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Dec-17
US Stock-Bond Europe Stock-Bond

Data source: S&P500 (TR), DJ Euro Stoxx (TR), BD 7-10 Yrs. DS Gov. (TR), US 7-10 Yrs. DS Gov. (TR), own calculations

© 2018-2022 Peter Oertmann 26

Summary of facts

§ Stock markets considerably changed since 1900

§ International stock markets returned 2.5 to 7.4% on a yearly basis in real terms
over the period 1900 to 2010, the return of the “world market” was 5.5%
§ The long-term equity risk premium is positive, the “world market” equity risk
premium is 3.8% over the period 1900 to 2010
§ Over the first decade of the 21st century (2000-2010) the equity risk premium was
significantly negative for many stock markets
§ The average long-term correlation between stock and bond markets is positive
with a coefficient of 0.24
§ Bonds diversify stock portfolios, especially in times of an increased risk aversion;
but inflation shocks lead to a higher co-movement between stocks and bonds
§ Over the last 30 years the stock-bond correlation was predominantly negative

© 2018-2022 Peter Oertmann 27

Part 2: Risk and return on capital markets

Brush-up: Calculating risk and return

Capital market returns: A long-term perspective
Some facts on stock market volatilities and correlations
Hands-on: Analyzing 25 years of stock market returns

© 2018-2022 Peter Oertmann 28

A study for 13 stock markets*

Research questions
§ Does stock market
risk depend on
market conditions?
§ How do volatility and
correlation interact?
§ Is stock market risk
related to economic
conditions?

* Source: Textbook Global Asset Allocation, Chapter 3

© 2018-2022 Peter Oertmann 29

Correlations over the sample period

© 2018-2022 Peter Oertmann 30

Correlation and volatility

© 2018-2022 Peter Oertmann 31

Correlation and volatility

Approach of Solnik, Boucrelle, and Le Fur (1996)

§ Regression of 36-month moving correlation between two countries on both
countries’ 36-month moving volatilities
§ Using monthly innovations to correct for autocorrelation

Dr ij,t = a + b1 × Ds j,t + b 2 × Ds i,t + u ij,t

§ Setup of the moving regression

36 months → ρ, σ, σ
36 months → ρ, σ, σ
36 months → ρ, σ, σ … … … … [1970.01 to 1998.08]

Time

© 2018-2022 Peter Oertmann 32

Correlation and volatility – regression results for the U.S. market

© 2018-2022 Peter Oertmann 33

Correlation and volatility – regression results for the Swiss market

© 2018-2022 Peter Oertmann 34

Semi-correlations – “up-up” vs. “down-down”

© 2018-2022 Peter Oertmann 35

Correlations during expansions and recessions

© 2018-2022 Peter Oertmann 36

Summing up

Empirical evidence
§ Stock market volatility is higher when markets go down
§ In periods of high volatility, stock markets become more correlated – and in
periods of low volatility, they are less correlated
§ Higher correlations are detected when equity markets go down simultaneously,
as well as when real economic activity is shrinking
Implications for investors
§ Optimal portfolios are unstable because market parameters are time-varying
§ Bad news lead to higher volatility than good news
§ International diversification benefits seem to vanish in exactly those market
environments when they are most strongly needed
§ Widely used portfolio risk measures such as VaR, or shortfall, are affected by
asymmetric parameters

© 2018-2022 Peter Oertmann 37

Part 2: Risk and return on capital markets

Brush-up: Calculating risk and return

Capital market returns: A long-term perspective
Some facts on stock market volatilities and correlations
Case: Analyzing 25 years of stock market returns

© 2018-2022 Peter Oertmann 38

Introduction into the case

§ As a researcher in an asset management company you have the task to analyze

the long-term evolution of international equity markets, i.e.
– Average returns
– Volatilities
– Long-term correlations between markets
– Correlation regimes
§ Your data set (Case1.xlsx) includes 16 stock market indices in local currencies
covering developed markets in North America, Europe and Asia-Pacific
– Monthly stock market data starting on December 31, 1992, and ending on
February 28, 2018
– Indexed to ”100” at the beginning of the period

© 2018-2022 Peter Oertmann 39

Stock market indices (Case1.xls)

12/31/92 01/31/93 ... 02/28/18

S&P500 100,00 100,84 ... 1028,34
NASDAQ100 100,00 102,94 ... 2201,10
DJINDUS 100,00 100,34 ... 1366,59
SPTSX60 100,00 98,34 ... 825,99
DJESTOXX50 100,00 101,03 ... 645,70
SMI 100,00 99,25 ... 745,06
FTSE100 100,00 98,78 ... 617,50
OMX 100,00 96,93 ... 2356,90
DAX30 100,00 101,73 ... 804,88
ATX 100,00 103,17 ... 760,85
CAC40 100,00 95,43 ... 624,97
IBEX 35 100,00 108,99 ... 1127,30
SPASX200 100,00 98,20 ... 1038,61
HANGSENG 100,00 104,36 ... 1282,95
MSCISING 100,00 101,01 ... 399,27
Nikkei 100,00 100,59 ... 176,77

© 2018-2022 Peter Oertmann 40

Tasks

1. Display the long-term performance of the equity markets

2. Calculate mean returns and volatilities over the total period
3. Calculate yearly returns for the stock markets
4. Calculate the correlations between the markets over the period 1993-2017
5. Calculate the correlations for five sub-periods
– 1993-1997
– 1998-2002
– 2003-2007
– 2008-2012
– 2013-2017
6. Analyze the correlation regimes

© 2018-2022 Peter Oertmann 41

International stock markets: Long-term performance

3200,00

1600,00

800,00

400,00

200,00

100,00

50,00
01.12.92 01.12.95 01.12.98 01.12.01 01.12.04 01.12.07 01.12.10 01.12.13 01.12.16
S&P500 NASDAQ100 DJINDUS SPTSX60 DJESTOXX50 SMI
FTSE100 OMX DAX30 ATX CAC40 IBEX 35
SPASX200 HANGSENG MSCISING Nikkei

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 42

International stock markets: Mean returns and volatilities

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 43

International stock markets: Yearly returns

North America Europe Asia & Pacific

USA Canada Europe Switzerland UK Sweden Germany Austria France Spain Australia Hong Kong Singapore Japan
S&P500 NASDAQ100 DJINDUS SPTSX60 DJESTOXX50 SMI FTSE100 OMX DAX30 ATX CAC40 IBEX 35 SPASX200 HANGSENG MSCI Nikkei

Full 9,7% 13,1% 10,9% 8,8% 7,7% 8,3% 7,5% 13,4% 8,6% 8,4% 7,6% 10,1% 9,7% 10,7% 5,7% 2,3%
1993 10,1% 11,8% 16,9% 26,5% 43,6% 43,3% 25,2% 62,6% 46,7% 52,4% 26,1% 61,2% 35,1% 123,1% 68,1% 3,0%
1994 1,3% 1,8% 5,0% 0,2% -5,0% -9,3% -6,5% 8,9% -7,1% -6,3% -14,4% -11,7% -12,1% -29,9% -5,1% 13,6%
1995 37,6% 43,1% 36,9% 12,9% 18,0% 27,9% 26,0% 30,0% 7,3% -8,8% 2,8% 22,6% 16,0% 27,3% 7,7% 1,5%
1996 23,0% 42,8% 28,7% 28,4% 26,5% 21,6% 16,9% 53,9% 27,8% 19,6% 27,6% 47,2% 9,9% 37,6% -1,8% -1,9%
1997 33,4% 20,8% 24,9% 17,6% 40,1% 60,9% 28,7% 39,9% 47,1% 15,4% 33,0% 44,7% 8,4% -17,5% -29,2% -20,5%
1998 28,6% 85,5% 18,1% -0,3% 34,9% 15,7% 17,5% 19,1% 17,7% -12,5% 34,1% 38,5% 5,9% -2,7% -7,3% -8,5%
1999 21,0% 102,1% 27,2% 34,1% 48,6% 7,1% 20,6% 73,7% 39,1% 9,4% 54,1% 20,4% 14,7% 74,1% 60,5% 37,9%
2000 -9,1% -36,8% -4,8% 7,9% -1,7% 9,3% -8,2% -10,9% -7,5% -8,1% 1,0% -20,6% 6,1% -9,1% -23,8% -26,7%
2001 -11,9% -32,6% -5,4% -14,9% -19,1% -20,2% -14,1% -18,1% -19,8% 9,4% -20,3% -6,1% 11,4% -22,4% -17,8% -22,9%
2002 -22,1% -37,5% -15,0% -14,0% -36,1% -27,1% -22,2% -40,5% -43,9% 3,2% -31,9% -26,5% -7,8% -15,6% -15,9% -17,9%
2003 28,7% 49,4% 28,3% 25,5% 18,4% 20,9% 17,9% 33,1% 37,1% 37,1% 19,9% 32,6% 16,0% 41,2% 35,7% 25,7%
2004 10,9% 10,7% 5,3% 13,8% 9,4% 5,4% 11,2% 19,7% 7,3% 60,4% 11,4% 21,3% 29,5% 17,1% 18,5% 8,6%
2005 4,9% 1,9% 1,7% 26,3% 24,3% 35,9% 20,8% 33,2% 27,1% 53,4% 26,6% 22,1% 24,1% 8,4% 17,4% 41,8%
2006 15,8% 7,2% 19,0% 19,1% 18,0% 18,2% 14,4% 22,8% 22,0% 24,0% 20,9% 36,3% 25,5% 39,0% 36,2% 8,1%
2007 5,5% 19,2% 8,9% 11,1% 9,6% -1,4% 7,4% -3,1% 22,3% 3,1% 4,2% 10,8% 17,4% 43,4% 20,8% -10,0%
2008 -37,0% -41,6% -31,9% -31,2% -42,4% -33,0% -28,3% -36,3% -40,4% -60,2% -40,3% -36,2% -37,5% -46,4% -47,3% -41,1%
2009 26,5% 54,6% 22,7% 31,9% 25,6% 22,1% 27,3% 49,2% 23,8% 48,7% 27,6% 41,3% 39,1% 56,7% 69,6% 21,1%
2010 15,1% 20,1% 14,1% 13,8% -2,8% 1,2% 12,6% 24,8% 16,1% 19,8% 0,6% -12,7% 2,9% 8,6% 11,5% -1,3%
2011 2,1% 3,6% 8,4% -9,1% -14,1% -4,6% -2,2% -11,7% -14,7% -33,1% -13,4% -7,3% -9,2% -17,4% -16,9% -15,6%
2012 16,0% 18,3% 10,2% 8,1% 18,1% 19,1% 10,0% 16,3% 29,1% 30,5% 20,4% 2,2% 22,2% 27,4% 23,4% 25,6%
2013 32,4% 36,9% 29,7% 13,3% 21,5% 23,9% 18,7% 25,3% 25,5% 8,7% 22,2% 27,6% 22,0% 6,6% 5,1% 59,4%
2014 13,7% 19,4% 10,0% 12,3% 4,0% 12,9% 0,7% 13,8% 2,7% -13,1% 2,7% 8,5% 7,1% 5,3% 8,2% 9,0%
2015 1,4% 9,8% 0,2% -7,8% 6,4% 1,1% -1,3% 2,1% 9,6% 12,9% 11,9% -3,7% 4,2% -3,9% -11,9% 11,0%
2016 12,0% 7,3% 16,5% 21,4% 3,7% -3,4% 19,1% 9,3% 6,9% 11,1% 8,9% 2,5% 13,4% 4,3% 3,3% 2,4%
2017 21,8% 33,0% 28,1% 9,8% 9,2% 17,9% 11,9% 7,7% 12,5% 32,8% 12,7% 11,3% 13,4% 41,3% 25,5% 21,3%

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 44

International stock markets: Correlations 1993-2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 S&P500 0,82 0,95 0,77 0,79 0,69 0,79 0,70 0,76 0,62 0,75 0,68 0,69 0,64 0,63 0,56
2 NASDAQ100 0,82 0,70 0,68 0,66 0,48 0,63 0,66 0,65 0,40 0,63 0,60 0,55 0,56 0,52 0,47

3 DJINDUS 0,95 0,70 0,71 0,75 0,69 0,77 0,67 0,73 0,61 0,71 0,65 0,66 0,64 0,66 0,52
4 SPTSX60 0,77 0,68 0,71 0,66 0,57 0,68 0,61 0,62 0,63 0,65 0,59 0,64 0,64 0,59 0,50
5 DJESTOXX50 0,79 0,66 0,75 0,66 0,77 0,82 0,82 0,94 0,68 0,96 0,84 0,67 0,57 0,56 0,54
6 SMI 0,69 0,48 0,69 0,57 0,77 0,71 0,66 0,72 0,60 0,74 0,67 0,58 0,47 0,48 0,47
7 FTSE100 0,79 0,63 0,77 0,68 0,82 0,71 0,70 0,76 0,68 0,80 0,71 0,70 0,62 0,59 0,48

8 OMX 0,70 0,66 0,67 0,61 0,82 0,66 0,70 0,79 0,57 0,78 0,73 0,62 0,58 0,54 0,53
9 DAX30 0,76 0,65 0,73 0,62 0,94 0,72 0,76 0,79 0,65 0,88 0,74 0,63 0,56 0,56 0,51

10 ATX 0,62 0,40 0,61 0,63 0,68 0,60 0,68 0,57 0,65 0,66 0,62 0,66 0,57 0,56 0,50
11 CAC40 0,75 0,63 0,71 0,65 0,96 0,74 0,80 0,78 0,88 0,66 0,79 0,64 0,53 0,52 0,52
12 IBEX 35 0,68 0,60 0,65 0,59 0,84 0,67 0,71 0,73 0,74 0,62 0,79 0,62 0,56 0,52 0,51
13 SPASX200 0,69 0,55 0,66 0,64 0,67 0,58 0,70 0,62 0,63 0,66 0,64 0,62 0,63 0,62 0,58
14 HANGSENG 0,64 0,56 0,64 0,64 0,57 0,47 0,62 0,58 0,56 0,57 0,53 0,56 0,63 0,77 0,44
15 MSCISING 0,63 0,52 0,66 0,59 0,56 0,48 0,59 0,54 0,56 0,56 0,52 0,52 0,62 0,77 0,46
16 Nikkei 0,56 0,47 0,52 0,50 0,54 0,47 0,48 0,53 0,51 0,50 0,52 0,51 0,58 0,44 0,46

Average 0,72 0,60 0,70 0,64 0,73 0,62 0,69 0,66 0,70 0,60 0,71 0,66 0,63 0,59 0,57 0,51
Overall average 0,65

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 45

International stock markets: Correlations 1993-1997

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 S&P500 0,75 0,94 0,69 0,68 0,57 0,61 0,58 0,55 0,47 0,56 0,55 0,60 0,58 0,52 0,33
2 NASDAQ100 0,75 0,66 0,48 0,40 0,31 0,46 0,43 0,30 0,31 0,28 0,40 0,36 0,45 0,38 0,18

3 DJINDUS 0,94 0,66 0,75 0,69 0,58 0,61 0,61 0,57 0,50 0,57 0,60 0,68 0,66 0,58 0,38
4 SPTSX60 0,69 0,48 0,75 0,56 0,44 0,59 0,49 0,45 0,60 0,47 0,46 0,65 0,67 0,50 0,32
5 DJESTOXX50 0,68 0,40 0,69 0,56 0,64 0,73 0,69 0,91 0,75 0,90 0,72 0,72 0,63 0,63 0,35
6 SMI 0,57 0,31 0,58 0,44 0,64 0,53 0,53 0,60 0,51 0,57 0,61 0,54 0,45 0,44 0,24
7 FTSE100 0,61 0,46 0,61 0,59 0,73 0,53 0,52 0,64 0,59 0,68 0,62 0,73 0,64 0,55 0,18

8 OMX 0,58 0,43 0,61 0,49 0,69 0,53 0,52 0,55 0,57 0,58 0,71 0,69 0,60 0,54 0,39
9 DAX30 0,55 0,30 0,57 0,45 0,91 0,60 0,64 0,55 0,74 0,74 0,57 0,63 0,58 0,59 0,23

10 ATX 0,47 0,31 0,50 0,60 0,75 0,51 0,59 0,57 0,74 0,59 0,54 0,63 0,57 0,50 0,21
11 CAC40 0,56 0,28 0,57 0,47 0,90 0,57 0,68 0,58 0,74 0,59 0,64 0,60 0,47 0,48 0,29
12 IBEX 35 0,55 0,40 0,60 0,46 0,72 0,61 0,62 0,71 0,57 0,54 0,64 0,74 0,57 0,53 0,42
13 SPASX200 0,60 0,36 0,68 0,65 0,72 0,54 0,73 0,69 0,63 0,63 0,60 0,74 0,73 0,62 0,47
14 HANGSENG 0,58 0,45 0,66 0,67 0,63 0,45 0,64 0,60 0,58 0,57 0,47 0,57 0,73 0,80 0,27
15 MSCISING 0,52 0,38 0,58 0,50 0,63 0,44 0,55 0,54 0,59 0,50 0,48 0,53 0,62 0,80 0,33
16 Nikkei 0,33 0,18 0,38 0,32 0,35 0,24 0,18 0,39 0,23 0,21 0,29 0,42 0,47 0,27 0,33

Average 0,60 0,41 0,63 0,54 0,67 0,50 0,58 0,57 0,58 0,54 0,56 0,58 0,63 0,58 0,53 0,31
Overall average 0,55

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 46

International stock markets: Correlations 1998-2002

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 S&P500 0,83 0,92 0,83 0,80 0,70 0,85 0,73 0,79 0,44 0,78 0,72 0,67 0,63 0,59 0,50
2 NASDAQ100 0,83 0,65 0,72 0,71 0,45 0,67 0,74 0,71 0,16 0,70 0,67 0,65 0,57 0,47 0,54

3 DJINDUS 0,92 0,65 0,73 0,75 0,72 0,86 0,69 0,77 0,57 0,73 0,67 0,63 0,64 0,67 0,45
4 SPTSX60 0,83 0,72 0,73 0,67 0,65 0,67 0,67 0,66 0,48 0,69 0,64 0,61 0,62 0,53 0,53
5 DJESTOXX50 0,80 0,71 0,75 0,67 0,81 0,87 0,90 0,95 0,50 0,98 0,85 0,60 0,50 0,44 0,49
6 SMI 0,70 0,45 0,72 0,65 0,81 0,83 0,68 0,74 0,63 0,81 0,72 0,54 0,47 0,43 0,49
7 FTSE100 0,85 0,67 0,86 0,67 0,87 0,83 0,76 0,82 0,61 0,85 0,79 0,63 0,61 0,55 0,48

8 OMX 0,73 0,74 0,69 0,67 0,90 0,68 0,76 0,88 0,41 0,88 0,80 0,56 0,54 0,41 0,49
9 DAX30 0,79 0,71 0,77 0,66 0,95 0,74 0,82 0,88 0,51 0,93 0,82 0,61 0,52 0,46 0,46

10 ATX 0,44 0,16 0,57 0,48 0,50 0,63 0,61 0,41 0,51 0,49 0,54 0,42 0,40 0,40 0,31
11 CAC40 0,78 0,70 0,73 0,69 0,98 0,81 0,85 0,88 0,93 0,49 0,84 0,56 0,50 0,42 0,48
12 IBEX 35 0,72 0,67 0,67 0,64 0,85 0,72 0,79 0,80 0,82 0,54 0,84 0,57 0,54 0,43 0,49
13 SPASX200 0,67 0,65 0,63 0,61 0,60 0,54 0,63 0,56 0,61 0,42 0,56 0,57 0,56 0,66 0,58
14 HANGSENG 0,63 0,57 0,64 0,62 0,50 0,47 0,61 0,54 0,52 0,40 0,50 0,54 0,56 0,72 0,41
15 MSCISING 0,59 0,47 0,67 0,53 0,44 0,43 0,55 0,41 0,46 0,40 0,42 0,43 0,66 0,72 0,32
16 Nikkei 0,50 0,54 0,45 0,53 0,49 0,49 0,48 0,49 0,46 0,31 0,48 0,49 0,58 0,41 0,32

Average 0,72 0,62 0,70 0,65 0,72 0,64 0,72 0,68 0,71 0,46 0,71 0,67 0,59 0,55 0,50 0,47
Overall average 0,63

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 47

International stock markets: Correlations 2003-2007

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 S&P500 0,82 0,94 0,70 0,78 0,68 0,69 0,67 0,77 0,54 0,76 0,62 0,65 0,55 0,62 0,44
2 NASDAQ100 0,82 0,74 0,63 0,58 0,43 0,51 0,51 0,59 0,41 0,57 0,50 0,51 0,54 0,51 0,39

3 DJINDUS 0,94 0,74 0,59 0,71 0,64 0,62 0,63 0,71 0,43 0,68 0,56 0,58 0,51 0,62 0,44
4 SPTSX60 0,70 0,63 0,59 0,65 0,44 0,61 0,53 0,58 0,61 0,66 0,57 0,60 0,63 0,64 0,57
5 DJESTOXX50 0,78 0,58 0,71 0,65 0,83 0,76 0,82 0,95 0,59 0,96 0,78 0,60 0,35 0,54 0,46
6 SMI 0,68 0,43 0,64 0,44 0,83 0,63 0,78 0,81 0,54 0,81 0,63 0,50 0,26 0,52 0,44
7 FTSE100 0,69 0,51 0,62 0,61 0,76 0,63 0,66 0,70 0,56 0,73 0,62 0,60 0,39 0,56 0,47

8 OMX 0,67 0,51 0,63 0,53 0,82 0,78 0,66 0,79 0,61 0,79 0,62 0,58 0,29 0,59 0,48
9 DAX30 0,77 0,59 0,71 0,58 0,95 0,81 0,70 0,79 0,53 0,92 0,70 0,56 0,29 0,54 0,42

10 ATX 0,54 0,41 0,43 0,61 0,59 0,54 0,56 0,61 0,53 0,59 0,59 0,56 0,33 0,51 0,55
11 CAC40 0,76 0,57 0,68 0,66 0,96 0,81 0,73 0,79 0,92 0,59 0,71 0,61 0,34 0,54 0,50
12 IBEX 35 0,62 0,50 0,56 0,57 0,78 0,63 0,62 0,62 0,70 0,59 0,71 0,49 0,37 0,47 0,35
13 SPASX200 0,65 0,51 0,58 0,60 0,60 0,50 0,60 0,58 0,56 0,56 0,61 0,49 0,41 0,59 0,54
14 HANGSENG 0,55 0,54 0,51 0,63 0,35 0,26 0,39 0,29 0,29 0,33 0,34 0,37 0,41 0,59 0,24
15 MSCISING 0,62 0,51 0,62 0,64 0,54 0,52 0,56 0,59 0,54 0,51 0,54 0,47 0,59 0,59 0,54
16 Nikkei 0,44 0,39 0,44 0,57 0,46 0,44 0,47 0,48 0,42 0,55 0,50 0,35 0,54 0,24 0,54

Average 0,68 0,55 0,63 0,60 0,69 0,60 0,61 0,62 0,66 0,53 0,68 0,57 0,56 0,41 0,56 0,46
Overall average 0,59

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 48

International stock markets: Correlations 2008-2012

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 S&P500 0,92 0,98 0,82 0,88 0,79 0,89 0,76 0,85 0,85 0,88 0,75 0,87 0,77 0,79 0,75
2 NASDAQ100 0,92 0,87 0,79 0,83 0,74 0,84 0,76 0,83 0,81 0,83 0,69 0,86 0,75 0,78 0,74

3 DJINDUS 0,98 0,87 0,76 0,86 0,79 0,87 0,74 0,82 0,79 0,85 0,75 0,83 0,74 0,75 0,69
4 SPTSX60 0,82 0,79 0,76 0,71 0,64 0,79 0,60 0,68 0,85 0,73 0,60 0,82 0,75 0,78 0,68
5 DJESTOXX50 0,88 0,83 0,86 0,71 0,83 0,89 0,79 0,94 0,82 0,98 0,89 0,83 0,77 0,77 0,74
6 SMI 0,79 0,74 0,79 0,64 0,83 0,80 0,68 0,78 0,74 0,84 0,68 0,79 0,66 0,65 0,65
7 FTSE100 0,89 0,84 0,87 0,79 0,89 0,80 0,77 0,84 0,84 0,90 0,77 0,88 0,77 0,74 0,73

8 OMX 0,76 0,76 0,74 0,60 0,79 0,68 0,77 0,80 0,73 0,78 0,68 0,74 0,81 0,78 0,75
9 DAX30 0,85 0,83 0,82 0,68 0,94 0,78 0,84 0,80 0,78 0,91 0,73 0,79 0,77 0,79 0,74

10 ATX 0,85 0,81 0,79 0,85 0,82 0,74 0,84 0,73 0,78 0,84 0,70 0,85 0,80 0,84 0,77
11 CAC40 0,88 0,83 0,85 0,73 0,98 0,84 0,90 0,78 0,91 0,84 0,84 0,84 0,75 0,76 0,73
12 IBEX 35 0,75 0,69 0,75 0,60 0,89 0,68 0,77 0,68 0,73 0,70 0,84 0,70 0,68 0,68 0,64
13 SPASX200 0,87 0,86 0,83 0,82 0,83 0,79 0,88 0,74 0,79 0,85 0,84 0,70 0,76 0,74 0,73
14 HANGSENG 0,77 0,75 0,74 0,75 0,77 0,66 0,77 0,81 0,77 0,80 0,75 0,68 0,76 0,89 0,74
15 MSCISING 0,79 0,78 0,75 0,78 0,77 0,65 0,74 0,78 0,79 0,84 0,76 0,68 0,74 0,89 0,75
16 Nikkei 0,75 0,74 0,69 0,68 0,74 0,65 0,73 0,75 0,74 0,77 0,73 0,64 0,73 0,74 0,75

Average 0,84 0,80 0,81 0,73 0,84 0,74 0,82 0,75 0,80 0,80 0,83 0,72 0,80 0,76 0,77 0,72
Overall average 0,78

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 49

International stock markets: Correlations 2013-2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 S&P500 0,86 0,96 0,59 0,63 0,71 0,63 0,62 0,64 0,58 0,62 0,53 0,59 0,57 0,66 0,59
2 NASDAQ100 0,86 0,75 0,54 0,67 0,66 0,61 0,62 0,67 0,67 0,65 0,62 0,54 0,63 0,57 0,57

3 DJINDUS 0,96 0,75 0,51 0,55 0,63 0,58 0,55 0,58 0,52 0,54 0,42 0,54 0,51 0,67 0,61
4 SPTSX60 0,59 0,54 0,51 0,55 0,41 0,58 0,59 0,52 0,56 0,55 0,53 0,54 0,47 0,43 0,27
5 DJESTOXX50 0,63 0,67 0,55 0,55 0,66 0,62 0,85 0,94 0,74 0,97 0,90 0,53 0,37 0,39 0,61
6 SMI 0,71 0,66 0,63 0,41 0,66 0,55 0,63 0,60 0,60 0,65 0,63 0,54 0,31 0,38 0,55
7 FTSE100 0,63 0,61 0,58 0,58 0,62 0,55 0,65 0,58 0,56 0,66 0,54 0,51 0,51 0,48 0,27

8 OMX 0,62 0,62 0,55 0,59 0,85 0,63 0,65 0,84 0,69 0,87 0,74 0,61 0,39 0,42 0,57
9 DAX30 0,64 0,67 0,58 0,52 0,94 0,60 0,58 0,84 0,72 0,90 0,79 0,50 0,39 0,40 0,64

10 ATX 0,58 0,67 0,52 0,56 0,74 0,60 0,56 0,69 0,72 0,73 0,74 0,54 0,53 0,40 0,45
11 CAC40 0,62 0,65 0,54 0,55 0,97 0,65 0,66 0,87 0,90 0,73 0,83 0,54 0,35 0,38 0,55
12 IBEX 35 0,53 0,62 0,42 0,53 0,90 0,63 0,54 0,74 0,79 0,74 0,83 0,53 0,41 0,40 0,55
13 SPASX200 0,59 0,54 0,54 0,54 0,53 0,54 0,51 0,61 0,50 0,54 0,54 0,53 0,49 0,50 0,43
14 HANGSENG 0,57 0,63 0,51 0,47 0,37 0,31 0,51 0,39 0,39 0,53 0,35 0,41 0,49 0,76 0,38
15 MSCISING 0,66 0,57 0,67 0,43 0,39 0,38 0,48 0,42 0,40 0,40 0,38 0,40 0,50 0,76 0,41
16 Nikkei 0,59 0,57 0,61 0,27 0,61 0,55 0,27 0,57 0,64 0,45 0,55 0,55 0,43 0,38 0,41

Average 0,65 0,64 0,60 0,51 0,67 0,57 0,55 0,64 0,65 0,60 0,65 0,61 0,53 0,47 0,48 0,50
Overall average 0,58

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 50

International stock markets: Correlation regimes

1993-97 1998-2002 2003-2007 2008-2012 2013-2017 Full Rank

S&P500 0,598 0,718 0,682 0,837 0,652 0,722 2
NASDAQ100 0,409 0,616 0,549 0,803 0,641 0,600 13
DJINDUS 0,625 0,698 0,626 0,805 0,595 0,695 5
SPTSX60 0,541 0,647 0,601 0,733 0,509 0,636 9
DJESTOXX50 0,666 0,722 0,693 0,836 0,665 0,735 1
SMI 0,504 0,644 0,597 0,736 0,567 0,621 11
FTSE100 0,579 0,722 0,608 0,821 0,555 0,695 6
OMX 0,566 0,676 0,625 0,745 0,642 0,663 7
DAX30 0,576 0,708 0,658 0,804 0,648 0,700 4
ATX 0,540 0,458 0,530 0,801 0,603 0,601 12
CAC40 0,562 0,710 0,678 0,832 0,652 0,706 3
IBEX 35 0,579 0,672 0,572 0,719 0,612 0,657 8
SPASX200 0,626 0,590 0,560 0,803 0,527 0,633 10
HANGSENG 0,578 0,548 0,406 0,761 0,471 0,585 14
MSCISING 0,533 0,500 0,559 0,765 0,484 0,572 15
Nikkei 0,306 0,468 0,456 0,723 0,496 0,506 16

Period average 0,549 0,631 0,588 0,783 0,582 0,645

Source: Case1.xlsx data, own calculations

© 2018-2022 Peter Oertmann 51

Part 2: Selected references

Global Asset Allocation, Chapter 3

Dimson, E., P. Marsh, and M. Staunton (2002), Triumph of the Optimists, Princeton University Press
Dimson, E. et al. (2011), Credit Suisse Global Investment Returns, Credit Suisse AG
Solnik, B., C. Boucrelle and Y. Le Fur (1996), International market correlation and volatility, Financial
Analysts Journal

© 2018-2022 Peter Oertmann 52