This article first appeared on Valuewalk. Introduction “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable […]
Over the last three decades, Indian equity markets generated strong investment returns with local currency returns of nearly 15%. In this article, we show that adding a global equity allocation resulted in lower portfolio risk. Additionally, against the commonly held perception, the improvement in risk did not come at the expense of investment returns.
The low-yield environment manufactured by central banks has encouraged and precipitated yield-seeking speculation. Investors and speculators alike have taken up a near-religious conviction in the demi-god status of central bankers. Will these central bankers continue to enjoy their god like status indefinitely or will they disappoint their followers?
In this article, I provide evidence that GDP growth rates do not correlated well with investment returns while refuting the claim of a prominent investment manager from India that GDP growth rates are somehow directly linked with investment returns.
Trailing 3-year and subsequent returns in developed markets show existence of both momentum and mean reversion with momentum persisting in the near-term. The best performing developed markets over the past three years, continue to outperform over the next year and vice versa. However, returns show some mean reversion in the second and third year with the mean reversion effect being stronger with countries that outperformed earlier.