Index Market Analysis Report

Comparative Analysis of Asian and European Markets

Author

S.Matsumoto

Published

October 28, 2024

Introduction

This analysis explores investment opportunities across Asian and European markets, focusing on:

  1. Identifying stable markets for consistent profits
  2. Finding high-return countries for growth investment
  3. Determining markets to avoid
  4. Comparing investment attractiveness between Asia and Europe

Executive Summary

Our analysis of financial market performance across Asia and Europe reveals several key insights:

  • Most stable markets: India, Indonesia, and Singapore show the best combination of stability and returns
  • Highest returning markets: India, Indonesia, and Germany lead in average annual returns
  • Markets to avoid: Italy, Spain, and France show poor risk-adjusted returns
  • Regional comparison: Asian markets show higher average returns but with higher volatility, while European markets (particularly Germany and Netherlands) demonstrate more consistent outperformance against benchmarks

Let’s explore the detailed analysis.

1. Market Stability Analysis

First, we’ll analyze market stability by looking at volatility measures and risk-adjusted returns.

Market Stability Metrics by Country
Country Mean Return Median Return Std Dev Coef of Variation Sharpe Ratio % Positive Years # Years
India 17.77% 18.68% 25.51% 1.44 0.697 85.7% 7
Indonesia 10.16% 6.16% 15.01% 1.48 0.677 77.8% 9
Singapore 5.87% 3.86% 9.63% 1.64 0.610 55.6% 9
Germany 10.08% 17.01% 18.76% 1.86 0.537 81.2% 16
Taiwan 7.48% 10.20% 18.91% 2.53 0.396 66.7% 12
South Korea 7.68% 5.43% 19.55% 2.55 0.393 64.3% 14
United Kingdom 4.31% 5.84% 12.39% 2.88 0.348 76.5% 17
Malaysia 2.31% -0.20% 6.71% 2.90 0.345 50.0% 10
Japan 6.77% 8.07% 22.62% 3.34 0.299 66.7% 15
The Netherlands 4.93% 8.17% 20.45% 4.15 0.241 75.0% 16
China 7.91% 3.67% 43.70% 5.52 0.181 56.2% 16
France 1.78% 3.40% 17.51% 9.82 0.102 56.2% 16
Spain 0.60% -0.82% 19.92% 33.35 0.030 46.7% 15
Italy 0.33% 3.72% 19.55% 59.11 0.017 50.0% 18

1.1 Risk-Adjusted Returns Visualization

1.2 Consistency of Returns

2. High-Return Markets Analysis

Let’s identify the highest returning markets and their performance characteristics.

2.1 Annual Returns of Top Performers

3. Markets to Avoid

Based on our analysis, we’ll identify the markets with poor risk-adjusted returns.

4. Regional Comparison: Asia vs. Europe

Let’s compare the performance of Asian vs. European markets to determine which region is more attractive for investment.

Performance Comparison: Asia vs. Europe
Region Mean Return Median Return Std Dev Sharpe Ratio % Positive Years % Outperformance
Asia 7.79% 6.03% 24.06% 0.324 64.1% 47.8%
Europe 3.64% 6.24% 18.09% 0.201 64.3% 48.0%

4.1 Outperformance Analysis by Region

4.2 Return vs Outperformance Correlation

5. Visualizations from Original Code

Let’s implement the visualizations you provided in your original code.

5.1 Country Performance vs Benchmark

5.2 Performance Heatmap

5.3 Outperformance Frequency

5.4 Additional Visualization: Volatility Over Time

5.5 Additional Visualization: Return Distribution

6. Conclusion

Based on our analysis, we can draw the following conclusions to answer the initial questions:

What markets are more stable to make a profit?

Most Stable Markets for Consistent Profits
Country Mean Return Std Dev Stability (CoV) Sharpe Ratio % Positive Years
India 17.77% 25.51% 1.44 0.697 85.7%
Indonesia 10.16% 15.01% 1.48 0.677 77.8%
Singapore 5.87% 9.63% 1.64 0.610 55.6%
Germany 10.08% 18.76% 1.86 0.537 81.2%
Taiwan 7.48% 18.91% 2.53 0.396 66.7%

What markets are high-return country?

Highest Return Markets
Country Mean Return Std Dev Sharpe Ratio % Positive Years
India 17.77% 25.51% 0.697 85.7%
Indonesia 10.16% 15.01% 0.677 77.8%
Germany 10.08% 18.76% 0.537 81.2%
China 7.91% 43.70% 0.181 56.2%
South Korea 7.68% 19.55% 0.393 64.3%

What markets should be avoided for investment?

Markets to Avoid
Country Mean Return Std Dev Sharpe Ratio % Positive Years
Italy 0.33% 19.55% 0.017 50.0%
Spain 0.60% 19.92% 0.030 46.7%
France 1.78% 17.51% 0.102 56.2%
China 7.91% 43.70% 0.181 56.2%
The Netherlands 4.93% 20.45% 0.241 75.0%

By region, which market will be attractive, Asia or Europe?

Attractiveness by Region
Region Mean Return Median Return Std Dev Sharpe Ratio % Positive Years % Outperformance
Asia 7.79% 6.03% 24.06% 0.324 64.1% 47.8%
Europe 3.64% 6.24% 18.09% 0.201 64.3% 48.0%

Summary of Investment Recommendations

Based on our comprehensive analysis, we recommend:

  1. For stable returns: Focus on India, Indonesia, and Singapore, which provide the best balance of stability and returns.

  2. For growth-oriented investors: Consider India, Indonesia, and Germany, which have demonstrated the highest average returns with acceptable risk profiles.

  3. Markets to avoid: Italy, Spain, and France show poor risk-adjusted returns and inconsistent performance.

  4. Regional allocation:

    • Asia offers higher average returns but with greater volatility, suited for growth-oriented investors with higher risk tolerance
    • Europe (particularly Germany and Netherlands) shows more consistent outperformance against benchmarks, better suited for more conservative investors

  5. Optimal portfolio strategy: Consider a balanced approach with:

    • Core allocation to stable markets (India, Indonesia, Singapore)
    • Growth allocation to high-return markets (add Germany)
    • Regional diversification with select European markets (Germany, Netherlands)
    • Avoid underperforming markets (Italy, Spain, France)

This analysis document does not guarantee for your business operations. This is the case study to understand the movement of national index market.