Investors return to European equity markets
Christine Lagarde (IMF) and Mario Draghi (ECB) Exaggerated fear has been overcome Graph and numbers from the last six months are clear: investors are coming back on the European equity market. Whereas the Nasdaq composite or the Dow Jones indices performances over the last six months are below 10% , the European equity index Euro Stoxx 50 performance during that period is close to 25% (see Fig. 1). Clearly, the realized volatility of the European Index is still much higher than its American counterparts (28% for the EURO STOXX 50 vs 13%-15% for the American indices). One might then say: “ok, this is just a windows-measurement effect – wait a little bit and you will see the realized volatility getting back the European performance”. Fig 1. Euro Stoxx 50 positive bias - June/Nov 2012 Yet something else is happening here: the addition of risk in the European shares is converted into performance with a much better efficiency (conversion rate = Sharpe ratio) than it is o...