1. The annualized average return for Japan was 0.06900 and the annualized standard deviation was 0.97949. For Hong Kong, the annualized average return was 3.63734 and the annualized standard deviation was 21.33052.
2. Investment in Japanese stocks is recommended over Hong Kong stocks due to the much lower risk, as measured by standard deviation, despite the lower returns for Japan.
3. Additional statistics like correlation coefficients between countries' stock markets and forecasts of economic changes could provide further insight to inform investment advice between the two countries.
1. The annualized average return for Japan was 0.06900 and the annualized standard deviation was 0.97949. For Hong Kong, the annualized average return was 3.63734 and the annualized standard deviation was 21.33052.
2. Investment in Japanese stocks is recommended over Hong Kong stocks due to the much lower risk, as measured by standard deviation, despite the lower returns for Japan.
3. Additional statistics like correlation coefficients between countries' stock markets and forecasts of economic changes could provide further insight to inform investment advice between the two countries.
1. The annualized average return for Japan was 0.06900 and the annualized standard deviation was 0.97949. For Hong Kong, the annualized average return was 3.63734 and the annualized standard deviation was 21.33052.
2. Investment in Japanese stocks is recommended over Hong Kong stocks due to the much lower risk, as measured by standard deviation, despite the lower returns for Japan.
3. Additional statistics like correlation coefficients between countries' stock markets and forecasts of economic changes could provide further insight to inform investment advice between the two countries.
1. The annualized average return for Japan was 0.06900 and the annualized standard deviation was 0.97949. For Hong Kong, the annualized average return was 3.63734 and the annualized standard deviation was 21.33052.
2. Investment in Japanese stocks is recommended over Hong Kong stocks due to the much lower risk, as measured by standard deviation, despite the lower returns for Japan.
3. Additional statistics like correlation coefficients between countries' stock markets and forecasts of economic changes could provide further insight to inform investment advice between the two countries.
1. Use the data from Appendix A to calculate the returns and
standard deviations for Japan and Hong Kong. What are the annualized average returns and standard deviations for these two countries? Annualized Annualized Annualized Annualized Average return average return Standard Standard Japan Hong Kong Deviation Deviation Hong Japan Kong 0.06900 3.63734 0.97949 21.33052
2. Based on these results what is your investment advice for holding
stock in these two countries?
As we see, standard deviation for Japan is way lower (Around 20
times less) than Hong Kong. It means, that it is less risky to invest in the Japanese stock markets, but we get less return (50 times less). I would suggest to invest in both depended on persons individual preferences (if they are risk-averse or risk-neutral)
3. What other statistics would you calculate to help inform your
advice in question #2? (You don't need to do the calculations, just explain what you would calculate, and how your results would affect your advice).
If we had some kind of forecast about the future economic changes
or expectations around the world, especially in the neighborhood countries (i.e. exchange rates). Having a correlation coefficient between the stock markets of countries who import and export a lot from these two countries is also going to be helpful.