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

Iskandar Sheraliev
Iskandar Sheraliev
 e 
Robert Ślepaczuk
Robert Ślepaczuk
   | 30 mag 2023
Central European Economic Journal's Cover Image
INFORMAZIONI SU QUESTO ARTICOLO
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Pubblicato online: 30 mag 2023
Pagine: 90 - 115
DOI: https://doi.org/10.2478/ceej-2023-0006
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© 2023 Iskandar Sheraliev et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.

Figure 1.

Daily Fluctuations of the Country IndicesNote. This four-panel figure shows the fluctuations of the prices of equity indices divided into four groups described based on baseline classification and presented in Table 2. For each country, we present the longest time period that was selected for this research.
Daily Fluctuations of the Country IndicesNote. This four-panel figure shows the fluctuations of the prices of equity indices divided into four groups described based on baseline classification and presented in Table 2. For each country, we present the longest time period that was selected for this research.

Figure 2.

First Sample DistributionsNote. R.D, daily return of four groups; R.M, monthly return; STD, annualized standard deviation; DSTD, annualized downside semi-deviation; VaR.H, historical 97.5% value-at-risk; VaR.N, Gaussian 97.5% value-at-risk; ES.H, historical 97.5% expected shortfall; ES.N, Gaussian 97.5% expected shortfall.
First Sample DistributionsNote. R.D, daily return of four groups; R.M, monthly return; STD, annualized standard deviation; DSTD, annualized downside semi-deviation; VaR.H, historical 97.5% value-at-risk; VaR.N, Gaussian 97.5% value-at-risk; ES.H, historical 97.5% expected shortfall; ES.N, Gaussian 97.5% expected shortfall.

Figure 3.

Second Sample DistributionsNote. R.D, daily return of four groups; R.M, monthly return; STD, annualized standard deviation; DSTD, annualized downside semi-deviation; VaR.H, historical 97.5% value-at-risk; VaR.N, Gaussian 97.5% value-at-risk; ES.H, historical 97.5% expected shortfall; ES.N, Gaussian 97.5% expected shortfall.
Second Sample DistributionsNote. R.D, daily return of four groups; R.M, monthly return; STD, annualized standard deviation; DSTD, annualized downside semi-deviation; VaR.H, historical 97.5% value-at-risk; VaR.N, Gaussian 97.5% value-at-risk; ES.H, historical 97.5% expected shortfall; ES.N, Gaussian 97.5% expected shortfall.

Comparison of MSCI and Baseline Classifications with early-developed included in emerging category

Baseline classification, ED in E MSCI classification Differences
Frontier Bangladesh, Egypt, India, Indonesia, Jordan, Kenya, Morocco, Nigeria, Pakistan, Philippines, Sri Lanka, Tunisia, Ukraine, Vietnam, Zimbabwe Bahrain, Bangladesh, Benin, Burkina Faso, Croatia, Estonia, Iceland, Ivory Coast, Jordan, Kazakhstan, Kenya, Lithuania, Mauritius, Morocco, Nigeria, Oman, Pakistan, Romania, Senegal, Serbia, Slovenia, Sri Lanka, Tunisia, Vietnam Egypt, India, Indonesia, emerging in MSCI classification; Ukraine and Zimbabwe, standalone
Emerging Argentina, Bahrain, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Estonia, Greece, Hungary, Jamaica, Kazakhstan, Kuwait, Lebanon, Lithuania, Malaysia, Mauritius, Mexico, Oman, Peru, Poland, Portugal, Romania, Russia, Serbia, Slovenia, South Africa, Spain, Taiwan, Thailand, Trinidad and Tobago, Turkey Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, United Arab Emirates Bahrain, Croatia, Estonia, Kazakhstan, Lithuania, Mauritius, Romania, Serbia, Slovenia, frontier; Portugal, Spain, developed; Argentina, Bosnia and Herzegovina, Botswana, Bulgaria, Trinidad and Tobago, Lebanon, Jamaica, standalone
Developed Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Korea, Netherlands, New Zealand, Norway, Qatar, Singapore, Sweden, Switzerland, United Arab Emirates, United Kingdom, USA Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom, USA Korea, Qatar, United Arab Emirates, emerging in MSCI classification
Standalone Argentina, Bosnia and Herzegovina, Botswana, Bulgaria, Jamaica, Lebanon, Malta, Palestine, Panama, Trinidad and Tobago, Ukraine, Zimbabwe We chose not to use this classification, and instead added early-developed market class.

Results of Baseline Income Categorization

R.D R.M STD DSTD VaR.H VaR.N ES.H ES.N MDD UI
Kruskal–Wallis rank sum test p values of H statistic:
First sample 0.201 0.767 0 0 0 0 0 0 0 0
Pairwise Wilcoxon rank sum test p values of U statistic
F_E - - 0 0 0 0 0 0 0 0
F_ED - - 0.077 0.479 0.306 0.077 0.515 0.096 0.265 0.185
F_D - - 0.34 0.222 0.453 0.341 0.515 0.365 0.265 0.185
E_ED - - 0 0 0 0 0 0 0 0
E_D - - 0 0 0 0 0 0 0 0
ED_D - - 0.008 0.044 0.078 0.016 0.06 0.009 0.027 0.009
Kruskal–Wallis rank sum test p values of H statistic
Second sample 0.524 0.91 0 0 0 0 0 0 0 0
Pairwise Wilcoxon rank sum test p values of U statistic
F_E - - 0 0 0 0 0 0 0.023 0.075
F_ED - - 0.761 0.417 0.513 0.804 0.463 0.729 0.097 0.075
F_D - - 0.272 0.086 0.273 0.159 0.146 0.457 0.003 0
E_ED - - 0 0 0 0 0 0 0 0
E_D - - 0 0 0 0 0 0 0 0
ED_D - - 0.282 0.417 0.513 0.186 0.463 0.501 0.089 0.033

Results of the Time Period Change

R.D R.M STD DSTD VaR.H VaR.N ES.H ES.N MDD UI
Kruskal–Wallis rank sum test p values of H-statistic:
First sample 0.695 0.945 0 0 0 0 0 0 0 0
Pairwise Wilcoxon rank sum test p values of U statistic:
F_E - - 0 0 0 0 0 0 0 0
F_ED - - 0 0.096 0.015 0.001 0.034 0 0.017 0.015
F_D - - 0.292 0.966 0.534 0.451 0.725 0.236 0.83 0.588
E_ED - - 0 0 0 0 0 0 0.006 0.015
E_D - - 0 0 0 0 0 0 0 0
ED_D - - 0.021 0.096 0.083 0.02 0.077 0.027 0.02 0.011
Kruskal–Wallis rank sum test p values of H-statistic:
Second sample 0.833 0.995 0 0 0 0 0 0 0 0
Pairwise Wilcoxon rank sum test p values of U statistic:
F_E - - 0 0 0 0 0 0 0.018 0.093
F_ED - - 0.287 0.224 0.548 0.362 0.447 0.189 0.17 0.093
F_D - - 0.049 0.098 0.299 0.072 0.156 0.03 0.018 0.002
E_ED - - 0 0 0 0 0 0 0 0.001
E_D - - 0 0 0 0 0 0 0 0
ED_D - - 0.287 0.437 0.548 0.362 0.447 0.203 0.17 0.093

Income Categorization Method Outcomes

Baseline Version 2 Version 3 Version 4 Version 5
Frontier Pakistan, Zimbabwe, Kenya, India, Bangladesh, Nigeria, Vietnam, Morocco, Philippines, Tunisia, Egypt, Sri Lanka, Ukraine, Indonesia, Jordan + Lebanon, Jamaica, Colombia + Lebanon, Jamaica, Colombia Baseline Baseline
Emerging Lebanon, Jamaica, Colombia, South Africa, Bosnia and Herzegovina, Peru, Botswana, Brazil, Thailand, Serbia, Mexico, Turkey, Argentina, Mauritius, Kazakhstan − Lebanon, Jamaica, Colombia+ Bulgaria, Russia, Malaysia, China − Lebanon, Jamaica, Colombia+ Bulgaria, Russia, Malaysia, China + Bulgaria, Russia, Malaysia, China + Bulgaria, Russia, Malaysia, China
Early-developed Bulgaria, Russia, Malaysia, China, Romania, Chile, Croatia, Oman, Trinidad and Tobago, Poland, Hungary, Greece, Lithuania, Bahrain, Portugal, Czech Republic, Estonia, Kuwait, Slovenia, Spain, Taiwan − Bulgaria, Russia, Malaysia, China − Bulgaria, Russia, Malaysia, China+ Korea, Italy, United Arab Emirates − Bulgaria, Russia, Malaysia, China − Bulgaria, Russia, Malaysia, China+ Korea, Italy, United Arab Emirates
Developed Korea, Italy, United Arab Emirates, France, Japan, United Kingdom, New Zealand, Canada, Israel, Belgium, Germany, Hong Kong, Austria, Finland, Qatar, Australia, Sweden, Netherlands, Singapore, Denmark, USA, Norway, Ireland, Switzerland Baseline − Korea, Italy, United Arab Emirates Baseline − Korea, Italy, United Arab Emirates

Average Summary Statistics of Equity Indices Daily Returns

GDP R.A Mean Min Median Max ASD Skewness Kurtosis
First sample: 51 Countries, 2002–2022
Frontier 3334 9.24% 0.04% −13.2% 0.05% 13.0% 22.2% −0.72 18.2
Emerging 6852 9.73% 0.04% −13.4% 0.06% 13.6% 29.1% −0.25 12.6
Early_developed 18122 5.43% 0.04% −14.9% 0.05% 13.1% 24.2% −0.52 19.3
Developed 50603 7.69% 0.04% −15.7% 0.04% 14.3% 22.7% −0.24 12.4
Second sample: 75 Countries, 2010–2022
Frontier 2804 0.52% 0.03% −13.8% 0.03% 9.4% 21.7% −1.77 45.4
Emerging 6921 0.52% 0.02% −14.4% 0.02% 9.9% 24.8% −1.20 38.4
Early_developed 17858 2.13% 0.02% −15.1% 0.02% 10.8% 20.4% −0.82 22.2
Developed 50603 6.80% 0.02% −17.5% 0.01% 10.4% 19.7% −0.54 12.3

MDD for All Countries Under Investigation from Baseline Classification

Country Class First (%) Second (%) Country Class First (%) Second (%)
ARGENTINA Emerging 80.6 LITHUANIA Early-developed 33.5
AUSTRALIA Developed 66.8 46.5 MALAYSIA Early-developed 51.9 47.0
AUSTRIA Developed 76.8 59.3 MAURITIUS Emerging 54.7
BAHRAIN Early-developed 83.3 34.4 MEXICO Emerging 64.8 60.2
BANGLADESH Frontier 64.9 MOROCCO Frontier 55.8 44.3
BELGIUM Developed 75.1 47.0 NETHERLANDS Developed 64.2 34.7
BOSNIA AND HERZEGOVINA Emerging 48.9 NEW ZEALAND Developed 65.7 36.5
BOTSWANA Emerging 87.3 NIGERIA Frontier 79.2
BRAZIL Emerging 75.7 74.2 NORWAY Developed 75.2 53.2
BULGARIA Early-developed 64.2 OMAN Early-developed 66.2 36.5
CANADA Developed 61.5 43.3 PAKISTAN Frontier 70.2
CHILE Early-developed 72.7 72.7 PERU Emerging 67.9 57.8
CHINA Early-developed 73.2 41.7 PHILIPPINES Frontier 61.7 49.9
COLOMBIA Emerging 77.6 77.6 POLAND Early-developed 78.2 59.9
CROATIA Early-developed 40.3 PORTUGAL Early-developed 67.4 50.4
CZECH REPUBLIC Early-developed 67.2 61.1 QATAR Developed 64.2 43.9
DENMARK Developed 64.2 34.7 ROMANIA Early-developed 44.3
EGYPT Frontier 70.3 58.2 RUSSIA Early-developed 79.8 66.5
ESTONIA Early-developed 34.5 SERBIA Emerging 60..2
FINLAND Developed 73.4 47.4 SINGAPORE Developed 64.3 39.5
FRANCE Developed 60.7 39.8 SLOVENIA Early-developed 40.1
GERMANY Developed 62.9 46.4 SOUTH AFRICA Emerging 63.2 60.8
GREECE Early-developed 97.4 91.1 SPAIN Early-developed 62.7 51.9
HONG KONG Developed 64.4 32.5 SRI LANKA Frontier 69.3
HUNGARY Early-developed 81.3 62.5 SWEDEN Developed 68.3 38.2
INDIA Frontier 74.3 46.2 SWITZERLAND Developed 52.7 26.6
INDONESIA Frontier 72.1 60.5 TAIWAN Early-developed 60.6 30.8
IRELAND Developed 83.5 41.0 THAILAND Emerging 62.3 46.5
ISRAEL Developed 41.4 39.4 TRINIDAD AND TOBAGO Early-developed 55.0
ITALY Developed 70.7 50.5 TUNISIA Frontier 48.6
JAMAICA Emerging 45.5 TURKEY Emerging 75,6% 75.6
JAPAN Developed 53.3 31.2 UKRAINE Frontier 95.1
JORDAN Frontier 67.0 37.2 UNITED ARAB EMIRATES Developed 86.1 58.1
KAZAKHSTAN Emerging 66.6 UNITED KINGDOM Developed 63.7 43.2
KENYA Frontier 47.2 USA Developed 55.7 35.0
KOREA Developed 72.1 50.0 VIETNAM Frontier 49.9
KUWAIT Early-developed 68.5 44.6 ZIMBABWE Frontier 96.5
LEBANON Emerging 68.7

Pairwise Wilcoxon Test p Values for Income Versions 4 and 5

STD VaR.N ES.N STD VaR.N ES.N
Version 4 Version 5
First sample: 51 Countries, 2002–2022
F_E 0.034 0.037 0.044 0.031 0.037 0.044
F_ED 0.857 1 1 0.507 0.357 0.571
F_D 0.857 0.669 1 0.73 0.57 0.885
E_ED 0.034 0.097 0.023 0.507 0.555 0.571
E_D 0.151 0.315 0.14 0.020 0.056 0.014
ED_D 0.857 1 1 0.507 0.487 0.571
Second sample: 75 Countries, 2010–2022
F_E 0.328 - 0.253 0.328 - 0.253
F_ED 0.716 - 0.803 0.707 - 0.868
F_D 0.033 - 0.034 0.031 - 0.028
E_ED 0.716 - 0.554 0.707 - 0.868
E_D 0.716 - 0.803 0.707 - 0.868
ED_D 0.093 - 0.094 0.223 - 0.205

Comparison of MSCI and Baseline Classifications with early-developed included in developed category

Baseline classification, ED in D MSCI classification Differences
Frontier Bangladesh, Egypt, India, Indonesia, Jordan, Kenya, Morocco, Nigeria, Pakistan, Philippines, Sri Lanka, Tunisia, Ukraine, Vietnam, Zimbabwe Bahrain, Bangladesh, Benin, Burkina Faso, Croatia, Estonia, Iceland, Ivory Coast, Jordan, Kazakhstan, Kenya, Lithuania, Mauritius, Morocco, Nigeria, Oman, Pakistan, Romania, Senegal, Serbia, Slovenia, Sri Lanka, Tunisia, Vietnam Egypt, India, Indonesia - emerging in MSCI classification; Ukraine and Zimbabwe, standalone
Emerging Argentina, Bosnia and Herzegovina, Botswana, Brazil, Colombia, Jamaica, Kazakhstan, Lebanon, Mauritius, Mexico, Peru, Serbia, South Africa, Thailand, Turkey Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, United Arab Emirates Argentina, Bosnia and Herzegovina, Botswana, Lebanon, Jamaica, standalone in MSCI classification; Kazakhstan, Mauritius, Serbia, frontier
Developed Australia, Austria, Bahrain, Belgium, Bulgaria, Canada, Chile, China, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Ireland, Israel, Italy, Japan, Korea, Kuwait, Lithuania, Malaysia, Netherlands, New Zealand, Norway, Oman, Poland, Portugal, Qatar, Romania, Russia, Singapore, Slovenia, Spain, Sweden, Switzerland, Taiwan, Trinidad and Tobago, United Arab Emirates, United Kingdom, USA Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom, USA Bahrain, Estonia, Oman, Romania, Slovenia, frontier; Chile, China, Czech Republic, Greece, Hungary, Korea, Kuwait, Malaysia, Poland, Qatar, Russia, Taiwan, United Arab Emirates, emerging; Bulgaria, standalone.
Standalone Argentina, Bosnia and Herzegovina, Botswana, Bulgaria, Jamaica, Lebanon, Malta, Palestine, Panama, Trinidad and Tobago, Ukraine, and Zimbabwe We chose not to use this classification, and instead added Early-developed market class.

Summary of the Literature Review

Subject Summary Authors
Economic growth Increases stock market return Al-Tamimi et al. (2011)
Amaresh et al. (2020)
Amtiran et al. (2017)
Giri and Joshi (2017)
Kalam (2020)
Montes and Tiberto (2012)
Osamwonyi and Evbayiro-Osagie (2012)
Singh et al. (2011)
Causes stock market development Cherif and Gazdar (2010)
Ho and Iyke (2017)
Yartey (2008)
Banking sector development Causes stock market development Dellas and Hess (2005)
Ho and Iyke (2017)
Pradhan et al. (2014)
Reduces stock market volatility Dellas and Hess (2005)
Financial liberalization Reduces stock market volatility James and Karoglou (2010)
Umutlu et al. (2010)
Downside volatility Increases stock market return Ali (2019)
Ang et al. (2006)
Estrada (2007)
Risk-adjusted returns Higher in emerging markets Atilgan and Demirtas (2016)

Reference to Research Hypotheses and Questions

RH/RQ Verification Details
RH1 Rejected Daily and monthly return do not depend on the level of economic development
RH2 Not rejected Volatility metrics depend on the level of economic development
RQ1 Rejected The obtained result is sensitive to varying time periods
RQ2 Rejected The obtained result is sensitive to varying income categorizations

Summary Statistics for Metrics of the Second Sample

Frontier Emerging Early-developed Developed Frontier Emerging Early-developed Developed
Min R.D R.M
−6.4 −8.1 −9.3 −10.6 −22.9 −23.0 −18.4 −16.3
Mean 0.0 0.0 0.0 0.0 0.5 0.3 0.4 0.7
Median 0.1 0.0 0.0 0.1 0.7 0.9 0.3 0.9
Max 2.1 4.0 5.0 7.6 12.6 14.0 13.6 15.4
Min STD DSTD
11.1 13.8 10.9 8.7 5.7 7.3 5.6 5.1
Mean 17.4 21.3 17.5 17.1 11.4 13.3 11.0 10.7
Median 16.0 19.8 15.9 15.4 10.2 12.3 9.3 9.5
Max 62.3 74.4 69.7 72.9 52.1 53.3 55.9 52.8
Min VaR.H VaR.N
1.0 1.3 0.9 0.9 1.2 1.5 1.2 1.0
Mean 2.0 2.4 2.0 1.9 2.1 2.6 2.1 2.1
Median 1.8 2.2 1.7 1.7 1.9 2.4 1.9 1.8
Max 9.1 9.9 10.2 9.6 8.8 10.3 9.4 9.7
Min ES.H ES.N
1.1 1.5 1.2 1.0 1.8 2.1 1.6 1.3
Mean 2.4 2.9 2.3 2.3 2.6 3.2 2.6 2.6
Median 2.1 2.6 2.1 2.0 2.4 3.0 2.4 2.3
Max 10.9 10.7 11.9 11.9 8.1 9.9 9.4 10.0
Min MDD UI
2.2 2.3 1.7 1.5 1.3 1.3 0.9 0.8
Mean 5.5 6.3 5.3 4.9 3.2 3.6 3.1 2.8
Median 4.7 5.4 4.5 4.1 2.8 3.2 2.5 2.2
Max 30.0 32.6 30.7 31.3 20.1 22.6 21.5 21.0

p Values of the Kruskal–Wallis Test for All Income Categorization Outcomes

R.D R.M STD DSTD VaR.H VaR.N ES.H ES.N MDD UI
First sample: 51 Countries, 2002–2022
Version 2 0.279 0.819 0.153 0.628 0.419 0.248 0.548 0.151 0.32 0.594
Version 3 0.428 0.833 0.121 0.805 0.432 0.181 0.543 0.138 0.277 0.468
Version 4 0.231 0.81 0.014 0.53 0.14 0.027 0.305 0.014 0.095 0.24
Version 5 0.358 0.819 0.01 0.697 0.138 0.018 0.293 0.012 0.081 0.177
Second sample: 75 Countries, 2010–2022
Version 2 0.484 0.867 0.145 0.275 0.233 0.191 0.238 0.161 0.156 0.075
Version 3 0.583 0.843 0.097 0.127 0.164 0.137 0.156 0.121 0.111 0.051
Version 4 0.507 0.819 0.022 0.11 0.067 0.051 0.082 0.02 0.289 0.222
Version 5 0.622 0.85 0.03 0.225 0.095 0.067 0.117 0.026 0.384 0.302

Summary Statistics for Metrics of the First Sample

Frontier Emerging Early-developed Developed Frontier Emerging Early-developed Developed
Min R.D R.M
−9.1 −12.5 −9.6 −10.6 −26.6 −31.8 −27.3 −24.7
Mean 0.0 0.1 0.0 0.0 1.0 1.2 0.7 0.8
Median 0.1 0.1 0.1 0.1 1.3 1.6 0.9 1.2
Max 5.6 9.7 9.0 7.6 15.7 20.6 17.2 15.4
Min STD DSTD
9.3 9.6 11.0 8.7 3.8 3.9 5.1 4.9
Mean 18.9 25.2 20.4 19.2 12.2 15.2 12.5 11.7
Median 17.2 22.6 17.8 16.5 10.9 13.7 10.7 9.9
Max 69.7 102.4 91.4 87.3 56.3 69.1 57.6 52.8
Min VaR.H VaR.N
0.7 0.6 0.9 0.9 1.1 0.9 1.2 1.0
Mean 2.1 2.8 2.3 2.1 2.3 3.1 2.5 2.3
Median 1.9 2.5 1.9 1.8 2.0 2.8 2.1 1.9
Max 10.1 12.9 10.6 9.8 9.7 14.1 12.5 11.9
Min ES.H ES.N
0.9 0.7 1.0 1.0 1.4 1.7 1.7 1.3
Mean 2.5 3.3 2.7 2.5 2.8 3.8 3.0 2.9
Median 2.3 2.9 2.2 2.1 2.6 3.4 2.7 2.5
Max 11.9 13.4 12.4 11.9 9.1 13.6 12.3 11.8
Min MDD UI
1.2 1.3 1.5 1.4 0.7 0.8 0.9 0.7
Mean 5.7 7.4 6.1 5.6 3.3 4.3 3.5 3.2
Median 4.7 5.9 5.0 4.4 2.6 3.3 2.8 2.4
Max 33.9 44.5 38.7 35.2 21.4 29.8 24.1 22.9
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