Monday, 3 March 2014

Credit Suisse Global Investment Returns Yearbook 2014

Credit Suisse Global Investment Returns Yearbook 2014

This popular yearly publication goes in depth on three different questions puzzling many investors. It doesn't provide you with an easy unambiguous answer: there is no such one. Instead the statistical analysis gives you the insight necessary to recognize accepted misconceptions and false evidence. You can download the Credit Suisse Global Investment Returns Yearbook 2014 on this link.

Emerging markets revisited

The first subject on emerging markets has its focus on the longer perspective. Emerging markets have outperformed developed markets during some decades, 2000-2009 being the most notable one. They have however lagged during the 1980's and 1990's after the term 'emerging markets' was coined. Going further back, emerging markets lost ground during WW-I and after WW-II. In both cases our (great) grand-parents were wiped out on investments in Russia or China after the respective revolutions. While those events pinpoint the specific reasons, the general picture is one of a systematicly higher volatility of emerging markets. Emerging markets currently lagging because of capital being repatriated after a carry trade no longer is successful, just is a temporary setback with little or no long-term influences. It is however illustrative for the higher volatility that characterizes emerging markets.
 

The growth puzzle

Why doesn't higher growth in an economy translate into better stock market returns? The second chapter comes up with a lot of statistical evidence on growth trajectories and a sound analysis of the lack of persistence of high growth. The comparison between developed and emerging markets is continued here. A lot of attention is also paid to the two 'disruptive events' (from an investor point of view), which were the two World Wars during the 20th century.
 

A behavioral take on investor returns

Investor returns typically are lower than the time-average returns of the markets they are invested in. The  psychology of "buy-high (greed is good) and sell low (the end is near)" is difficult to eradicate. The third chapter goes in depth on this phenomenon.

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