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

Figure 1.

Figure 2.

Figure 3.

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