4.

Results and discussion of findings

One perspective on the performance of investments in Switzerland market is provided by
Table 1, which presents the values of mean monthly returns, standard deviations, skewness and
excess kurtosis, for stock market returns in CHF, in US dollars and for the exchange rates against
the US dollar.
Overall, investments made in Swiss markets provided the US investor with small mean
monthly returns and comparable with the investment in the US market. In terms of risk, the
Swiss market was the riskiest from the US investors perspective in 2009 (with a standard
deviation of monthly returns of 0.075013356). At the other end, the period of time with the
lowest risk was 2008 (0.06074057), followed by 2011 and 2010.
Another interesting point refers to the skewness of monthly returns: a US investor would
obtain for 6 out of the 10 periods negatively skewed returns, the two most unusual being the ones
for 2009 and 2012. This is not necessarily good news from the US investor perspective, as
positively skewed returns are searched for by all investors. The kurtosis values, as skewness
values, indicate non-normality of returns and leptokurtic distributions in local currency and in
US dollars, thus confirming previous research on capital markets return attributes.

Table 1. Descriptive statistics of stock market returns and exchange rate changes

CURRENCY:
USD
Standard Variance
Average Deviation Skewness Kurtosis USD
0.00176973 0.703771 - 0.0009094
2007 5 0.030156646 397 0.060636603 23
-
0.03161257 0.035347 0.0036894
2008 2 0.06074057 242 -0.1865623 17
-
0.01720201 1.125472 0.0056270
2009 7 0.075013356 57 0.588427226 04
-
0.00782149 0.932395 0.0033703
2010 4 0.058054808 42 0.420848463 61
- -
0.00791220 0.211337 - 0.0035304
2011 7 0.059417798 05 0.114176801 75
 -
0.01329910 2.296759 0.0020382
2012 3 0.045146735 11 6.160877772 28
0.01780946 0.664344 0.0010811
2013 9 0.032881313 765 0.039359597 81
-
0.00196478 0.550265 0.0009690
2014 8 0.031129625 343 0.422192039 54
- -
0.00154874 0.371182 - 0.0015287
2015 1 0.039099782 02 1.094109107 93
- -
0.00635929 0.651052 0.0012723
2016 1 0.035670398 58 0.105948436 77

CURRENCY :
CHF
Standard Variance
Average Deviation Skewness Kurtosis CHF
-
0.00707245 0.617088 - 0.0008117
2007 7 0.028491537 173 0.159121869 68
-
0.03675870 0.313308 - 0.0024312
2008 9 0.049307886 964 1.261739001 68
-
0.01477108 1.146494 0.0030304
2009 1 0.055049579 96 2.133163409 56
- -
0.00080419 0.276806 - 0.0008195
2010 5 0.028627051 12 1.453789102 08
-
0.266130 - 0.0014204
2011 -0.00764441 0.037689226 96 1.146625719 78
0.01152014 0.550089 0.0006924
2012 6 0.026313743 76 0.904849327 13
0.01540815 0.248957 0.0007647
2013 1 0.027654145 446 1.73549961 52
0.00727641 0.177284 - 0.0003613
2014 4 0.019008246 957 1.425327666 13
-
0.00093459 0.177284 - 0.0024673
2015 2 0.049672792 957 1.058753546 86
-
0.418527 - 0.0009584
2016 -0.00509113 0.030958468 36 0.944928605 27

Average Standard Skewness Kurtosis

 Deviation
2007 0.007916248 0.016601105 0.821798618 1.108216241
2008 -0.000302581 0.037268823 0.480581445 -0.234276716
2009 0.008735038 0.018785211 -0.873735698 1.182999434
2010 0.005162962 0.032709678 -0.03812408 0.397619631
2011 0.003046628 0.044923963 -1.868944784 4.355009361
2012 0.00103739 0.019009219 0.144030386 -0.822022366
2013 0.00263665 0.01768101 -0.264701881 -1.260156938
2014 -0.007336925 0.011928093 0.382566583 0.788165844
2015 -0.001712161 0.025922878 -0.421483461 -0.626413921
2016 -0.001941478 0.01423899 0.195463688 -1.767861264

Chart Title
0.08 2.5

2
0.06
1.5
0.04
1

0.02 0.5

0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-0.5
-0.02
-1
-0.04
-1.5

-0.06 -2

Average Standard Deviation

Skewness Kurtosis

When we look at the exchange rate volatility and we compare it with the volatility of the local
stock market, we observe that all exchange rates have standard deviations of their changes that
are smaller than the standard deviations of the local markets returns. This result points towards
the significance of exchange rate volatility for an international investor and tells us that its
influence on the risk from a US based investor is small, even negligible. Apart from the values of
standard deviations for local returns compared to the US market we were interested in
investigating the effective contribution that the volatility of the local currencies exchange rate
fluctuations has on the Swiss market returns denominated in US dollars. As indicated by the
equation, the proportion of local market volatility explained by changes in the local currency
exchange rate depends not only on the volatility in the foreign exchange market, but also on the
covariance between local market returns and exchange rate changes. Ultimately, the contribution
of exchange rate volatility to the risk of a foreign investor in any European market depends on
the ratio between the covariance and the variance of exchange rate changes: when the covariance
is negative and higher in value than the variance of exchange rate changes, the foreign exchange
risk has a negative contribution to the overall risk, thereby reducing the risk in US dollars from
an investment in a foreign market.