Recent trends in relative performance of global equity markets

This paper analyses the performances of 22 developed and 18 emerging markets over the period 2003-2010. The performance is assessed each year in a multi-dimensional risk-adjusted return framework using data envelopment analysis, and the trend in the performance is estimated in a fixed effects panel data model. The results reveal positive trends in only a small percentage of developed (9%) and emerging (11%) markets. A high percentage (45%) of developed markets show a gradual decline in performance, compared to emerging markets (11%). However, the developed markets outperformed the emerging markets from 2004 to 2008. Even though the emerging markets subsequently outperformed the developed markets in 2009 and 2010, their performance weakened from 2009 to 2010, whereas the performance of the developed markets improved. There is evidence of a positive association between equity market performance and market capitalisation and turnover. It appears that equity market performance is not related to inflation or gross domestic product per capita. According to the overall ranking, Malaysia is the best performer, followed by the USA, the Philippines, Israel and Switzerland. A discussion of the robustness of the results to three alternative performance measures (the Sharpe ratio, Treynor ratio and average excess returns per unit of downside deviation) is provided. (C) 2012 Elsevier B.V. All rights reserved.