Question

Data. See Excel spreadsheet “GroupProject1.xlsx”. It contains the monthly returns of value-weighted equity indexes divided into various groups: • North America — Canada and the United states • Japan • Asia Pacific — Australia, Hong Kong, New Zealand, and Singapore • Europe — Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom • Global – All of the above countries All index returns are in US dollar terms. In addition, the file contains the 1-month US risk-free rate.

Questions 1.) On a single chart, plot the value of $1 invested in each of the five indexes over time. I.e., for all ?, plot the cumulative return series for each index: ??? = (1 + ?1)(1 + ?2)… (1 + ??) What patterns do you observe?

Date	North_America	Japan	Asia_exJapan	Europe	Global	Rf
9-Nov-44	-0.82%	0.78%	4.85%	5.05%	1.47%	0.68%
10-Nov-44	-8.93%	-11.25%	-7.82%	-10.20%	-10.10%	0.66%
11-Nov-44	-5.41%	-17.43%	-8.25%	-11.74%	-11.64%	0.60%
12-Nov-44	-1.33%	25.59%	-1.58%	7.27%	10.26%	0.68%
13-Nov-44	6.43%	-13.52%	-2.29%	0.17%	-3.30%	0.57%
14-Nov-44	3.11%	2.34%	-0.61%	-0.95%	1.63%	0.60%
11-Feb-45	4.73%	1.67%	6.03%	2.12%	2.99%	0.52%
12-Feb-45	7.70%	12.81%	9.26%	7.78%	9.57%	0.48%
13-Feb-45	2.80%	-3.76%	2.13%	-6.34%	-1.93%	0.44%
14-Feb-45	0.34%	2.68%	3.24%	-0.21%	1.13%	0.53%
15-Feb-45	4.16%	-1.59%	-0.40%	1.13%	1.22%	0.47%
16-Feb-45	-4.27%	-6.61%	-0.50%	-7.02%	-5.65%	0.42%
17-Feb-45	4.42%	1.85%	6.04%	5.94%	3.93%	0.49%
18-Feb-45	2.62%	-6.79%	-1.48%	1.86%	-0.94%	0.46%
19-Feb-45	-1.29%	9.10%	1.16%	3.42%	3.34%	0.46%
20-Feb-45	1.84%	4.47%	4.33%	-2.33%	1.78%	0.42%
21-Feb-45	-3.76%	-8.14%	-0.26%	-1.89%	-4.75%	0.39%
22-Feb-45	10.30%	2.85%	1.58%	6.61%	6.56%	0.38%

Answer 1

As per the observation from the grapgh, what we can observe at the first sight is that in the initial period all the indices gave returns less than the risk free rate. Even the retunrs provided by the asian markets and US markets were not much distant than the return provided by the risk free instrument.

During the initial years all index had negative returns but then for majority of perios=d gave linear returns with some variance in the returns by the end.