‘M5’ Global Financial Markets
Comparing Asset Classes
Chart-01 shows latest 18 months of performance for global baskets of asset classes (Switzerland, USA, Japan, Eurozone, and Great Britain), in local currency and rebased.
Table-01 in Exhibit 02 refers to latest 36 months, giving return and risk measures as well as information on the distribution of monthly rates of change.
Normalised risk and return data from Table-01 are illustrated graphically in the scatters of Chart-02. Observed risk is shown horizontally, and annualised return on the vertical axis. A dashed diagonal indicates equilibrium of risk and return. The scatter to the left refers to current data, the one to the right shows values 12 months ago.
Chart-03 plots ten years of M5 Composite Index values (M4 for Currencies), rebased to 100 at the chart’s starting date.
In Chart-04 the M5 equity basket is shown relative to the M5 bond basket, also rebased to a value of 100 ten year ago.
Chart-05 displays assets in terms of trailing 3-year normalised rates of return plotted across 10 years.
Corresponding to the previous exhibit, Chart-06 plots 3-year normalised observed risk. Unlike the popular risk-proxy volatility, observed risk, a metric developed by Agathos, is directional. Here it is shown with its naturally negative value, placing low risk readings at the top of the chart.
Table-02 shows actual values for all composite indices at fixed points in time: ten, five and three years ago, 12 months ago, latest year-end and last month. Please note that all baskets have an identical base value of 100 at the end of 1999. In the lower portion of the table, rates of return over a number of time frames are indicated. The best (green) and worst (red) performing asset class of each period is highlighted.