This Research Report studies the correlation of different countries indices with the Singapore market index. The findings show that other countries indices are not closely related to the Singapore Index and that this relationship varies through the period of study. Results which agree with those in many earlier studies. The results show that there are potential opportunities for international diversification on the part of Singapore investors.
The Major Findings in this Research are:
(1) countries like the U.S., U.K., Hong Kong, Australia and Singapore are better off for investment than others in terms of Risk/Return ratio over the period examined.
(2) The correlation of price return for the five year period of other countries with Singapore lies within a narrow range of 0.34 to 0.69.
(3) This period of study is one of very high volatility in the return in comparison with previous studies. All results indicated that the standard deviation to the arithmetic mean are above five times for the different indices studied, some of which are hundreds of times. This high volatility is relative to results obtained before the stock market crash in October 1987
(4) The standard deviation to the arithmetic mean of the common share price indices lies between 9 to 19 %, and besides, Japan, the Singapore Index is the highest at approximately 19%.
(5) The world beta of Singapore derive with respect to the world index was found to be 0.70 while the average beta of the countries under study was 0.85.