Investments, tenth edition

Rank Country 

Rank  Country

Rank Legend

  1  Pakistan 

 27 Indonesia 

  2  Jordan 

 28 Australia 

  3  Morocco 

 29 India 

  4  Sri Lanka 

 30 Mexico 

  5  Japan 

 31 Italy 

  6  Malaysia 

 32 Belgium 

  7  Philippines 

 33 Spain 

  8  Switzerland 

 34 France 

  9  Israel 

 35 Ireland

10 Egypt 

 

36 Netherlands

11 New 

Zealand   

37 Russia

12 Chile 

 

38 Korea

13 Hong 

Kong 

 

39 Austria

14 U.K. 

 

40 Greece

15 Colombia 

 

41 Finland

16 Thailand 

 

42 Sweden

17 Argentina 

 

 

43 Germany

18 Portugal 

 

44 Norway

19 Czech 

Republic  

45 Hungary

20 Peru 

 

46 Poland

21 Singapore 

 

47 Brazil

22 China 

 

48 Turkey

23 Denmark

24 Canada

25 Taiwan

26 South 

Africa

 

 

Figures  25.9 

 and  

25.10 

 show that dollar-denominated average excess returns and 

information ratios are a bit better than those denominated in local currencies. Since the 

risk-adjusted returns are no better in local currency than in dollars, we must conclude that 

the superior performance of emerging market portfolios is due to surprises about their eco-

nomic performance and not solely due to the decline in the U.S. dollar.    

 Figure 25.7 

Standard deviation of excess returns in dollar-denominated and local currencies, 2002–2011  

0

2

4

6

8

10

12

14

0

5

10

15

20

25

30

35

40

45

50

S

D

 of

 D

ol

la

r-

D

e

nom

ina

te

d a

nd 

 Lo

ca

l-Cu

rr

e

n

cy 

Exce

ss

 Re

tu

rn

s

Rank

Standard deviations of excess returns are ranked from low to high

SD of U.S. $-Denominated Returns

SD of Return in Local Currency

49

48

47

46

45

44

43

42

41

40

39

38

37

36

35

34

33

32

31

30

29

28

27

26

25

24

23

22

21

20

19

18

17

16

15

14

13

12

11

10

9

8

7

6

5

4

3

1

2

1

2

3 4 5

6 7

8

9

10

11

12

13

14

15

16

17

18

19

20

2122

2324

25

26

27

28

29

31

30

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

Rank Country 

Rank  Country

Rank Legend

  1    U.S. 

27  Czech Republic 

  2  Japan 

28  South Africa 

  3  Switzerland 

29  Sweden 

  4  Malaysia 

30  China 

  5  U.K. 

31  Thailand 

  6  Morocco 

32  Colombia 

  7  Israel 

33  Korea

  8  New Zealand 

34  Austria 

  9  Jordan 

35  Finland

10 Canada 

36 Norway

11 Hong 

Kong 

37 India

12 Denmark 

38 Peru

13 Chile 

39 Indonesia

14 Singapore 

40 Pakistan

15 Portugal 

41 Greece

16 Australia 

42 Poland

17 France 

 

43 Egypt

18 Netherlands 

44 Russia

19 Mexico 

45 Hungary

20 Italy 

46 Brazil

21 Philippines 

47 Sri 

Lanka

22 Taiwan 

48 Argentina

23 Belgium 

49 Turkey

24 Spain

25 Ireland

26 Germany

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  C H A P T E R  

2 5

 International 

Diversification 

905

 Figure 25.10 

Information ratios against U.S. computed from dollar-denominated and local-currency 

returns, 2002–2011  

1

2

3

4

5

6 7 8

9

10

11 12 1314

15

16 17 18 19

20 21

22 23

24 25

26 27 28 29 30 31 32

33 3435

36 37

38 39

4041 42

43 44

45 46

47

48

–0.30

–0.20

–0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

5

10

15

20

25

30

35

40

45

In

fo

rm

ati

o

n 

R

a

ti

o of

 M

a

rk

e

ts 

a

g

ai

nst 

U

.S

.

Rank

Information ratios are ranked from low to high

U.S.-Dollar Returns

Local-Currency Returns

1

2

3

4

5 6

7

8

9

10

11

12

13

14

15

16

17

18

19

21

22

23

24

25

26

27

28

29

3031

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

20

0

50

Rank Country 

Rank  Country

Rank Legend

s

e

n

i

p

p

i

l

i

h

P

7

2

d

n

a

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p

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8

2

e

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r

G

2

a

i

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n

I

9

2

d

n

a

l

n

i

F

3

a

e

r

o

K

0

3

y

l

a

t

I

4

a

n

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h

C

1

3

m

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i

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e

B

5

n

a

t

s

i

k

a

P

2

3

n

a

p

a

J

6

y

a

w

r

o

N

3

3

l

a

g

u

t

r

o

P

7

k

r

a

m

n

e

D

4

3

e

c

n

a

r

F

8

o

c

c

o

r

o

M

5

3

s

d

n

a

l

r

e

h

t

e

N

9

a

d

a

n

a

C

6

3

n

a

w

i

a

T

0

1

t

p

y

g

E

7

3

.

K

.

U

1

1

a

i

s

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a

l

a

M

8

3

y

n

a

m

r

e

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2

1

l

i

z

a

r

B

9

3

l

e

a

r

s

I

3

1

a

c

i

r

f

A

h

t

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o

S

0

4

a

i

r

t

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u

A

4

1

a

i

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u

A

1

4

n

a

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o

J

5

1

e

l

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h

C

2

4

n

i

a

p

S

6

1

d

n

a

l

i

a

h

T

3

4

a

n

i

t

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e

g

r

A

7

1

o

c

i

x

e

M

4

4

y

r

a

g

n

u

H

8

1

u

r

e

P

5

4

g

n

o

K

g

n

o

H

9

1

c

i

l

b

u

p

e

R

h

c

e

z

C

6

4

y

e

k

r

u

T

0

2

a

i

s

e

n

o

d

n

I

7

4

d

n

a

l

o

P

1

2

a

i

b

m

o

l

o

C

8

4

d

n

a

l

r

e

z

t

i

w

S

2

2

23

Russia

24

Sweden

25

Sri Lanka

26

New Zealand

 Figure 25.9 

Average dollar-denominated and local-currency excess returns, 2002–2011  

–1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

5

10

15

20

25

30

35

40

45

A

verage Excess Returns %/month

Rank

Average excess returns are ranked from low to high

U.S.-Dollar Excess Returns

Local-Currency Excess Returns

1

2

3

4 5 6

7 8 9 10

11

12 13

1415 16

1718 19

20 21 22 23 24

25

26 2728

29 30 31 32

33 34 35

3637

38

39 40

4142

43

4445

46

47

48

49

1

2

3

4

5 6

7 8 9

10

11

1213

14

15

16

17

1819

20

21

22

23

24

25

26

272829

30

33

31

32

34

35

36

37

38

39

40

41

42

43

44

45

46

4748

49

0