Global Stock Indexes

Global Stock Indexes

Global stock indexes

Currently, there are many global stock indexes available in the market, with a majority of them being used by investors for the purpose of obtaining information on market movements. However, it is important to understand that each index is different, and it is not always accurate to assume that the performance of each index will be the same.

Swiss Franc is superior to gold as a defensive asset for stock portfolios based on major global equity indexes

Various stock portfolios have been investigated in recent years, with a large share of research dedicated to gold and other precious metals. However, optimal asset allocation of Swiss Franc has largely been overlooked. This paper examines the benefits of using the Swiss currency in stock portfolios based on major global equity indexes. It also explores the hedging properties of gold and Swiss Franc.

The results show that Swiss Franc is a more effective safe haven asset than gold. This study is based on hedging effectiveness indicators derived through an Engle Dynamic Conditional Correlation model. They suggest that gold was not able to provide better protection during the financial turmoil episodes. In addition, they confirm that Swiss Franc has better properties than gold to reduce equity risk.

COVID-19 pandemic affects global stock indexes

Several studies have been conducted to analyze the impact of COVID-19 on global stock indexes. They have concluded that stock returns are negatively affected by this virus. The primary response differs from country to country. During the outbreak, the highest performing sectors recovered seven months after the market bottom, while the worst-hit industries partially recovered their losses.

The S&P 500 index recorded a significant decrease in mean stock value during the coronavirus epidemic. The mean stock value decreased by -0.73% and -1.38% on the event day and post event day, respectively. The S&P composite index also showed a minor decline in March and a marginal decline in June. The MSCI World Index also recorded higher highs than the first pandemic period in Thailand, Australia, and Singapore.

Shariah compliant stocks outperform conventional stocks

Increasing numbers of investors have started to seek investment in Shariah compliant stocks due to their potential benefits. These stocks can provide investors with a good alternative to conventional stocks, and are considered a socially responsible investment. Some studies have found that Islamic stocks outperform conventional stocks, while others have found no significant difference.

A study from the Australian Stock Exchange examined the performance of Shariah compliant stocks compared with conventional stocks. It also compared risk and return between the two. The study used a sample of 50 conventional stocks, as well as a sample of 50 Shariah-compliant stocks. The results indicate that Shariah-compliant stocks outperform conventional stocks, and have the potential to provide competitive returns.

Another study examined the performance of conventional and Shariah stocks in the S&P CNX Nifty index in India. It found that Shariah-compliant stocks had higher Jensen’s Alpha, Treynor ratio, and Sharpe ratio than conventional stocks.

Increases in stock return co-movements reflect the Forbes and Rigobon (2002) definition of financial contagion

During the Asian financial crisis of 1997, stock prices fell rapidly in some countries. The collapse of the Hong Kong stock market, accompanied by a 40 percent drop in the value of its currency, sent shockwaves throughout Asia and Latin America.

The term “contagion” was first used during the Asian crisis. This theory assumes that stock prices move together in a common trend and that shocks to one market are transmitted to another market through assets-trading.

Many studies have been conducted to examine the transmission of financial shocks. The most direct approach is to use correlation coefficients. However, this method can also be biased by heteroskedasticity, which means that test results may be affected by the effects of the market’s volatility.

Several countries have shown evidence of contagion. However, many studies are based on financial crisis periods.

Optimal hedge ratios exhibit huge downward swings during most crises’ episodes

Optimal hedge ratios are commonly used to quantify the optimal hedging properties of an asset. These metrics exhibit large downward swings during most financial turmoil episodes. The paper examines the optimal weights and optimal hedging strategies for global stock portfolios based on four aggregate stock market indexes.

In addition, the paper investigates the optimal weights of various safe haven assets, such as the Swiss Franc and gold. The paper shows that optimal weights are significantly lower in the Swiss Franc case, while optimal weights of gold are much higher. Optimal weights of equities in global portfolios also demonstrate strong downward trends during the 2007/2008 Global Financial Crisis.

The paper concludes that the optimal hedging strategies for Swiss Franc hedged stock portfolios are actually better than those of gold. This is in line with previous research on gold and the Swiss Franc. Moreover, the cost of using these strategies is significantly less than the cost of using gold.

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