Name: Giorgi Kharshiladze

Class: International Finance

Date: 01/31/2017

"Innocents Abroad" Questions

1. Use the data from Appendix A to calculate the returns and

standard deviations for Japan and Hong Kong. What are the annualized
average returns and standard deviations for these two countries?
Annualized Annualized Annualized Annualized
Average return average return Standard Standard
Japan Hong Kong Deviation Deviation Hong
Japan Kong
0.06900 3.63734 0.97949 21.33052

2. Based on these results what is your investment advice for holding

stock in these two countries?

As we see, standard deviation for Japan is way lower (Around 20

times less) than Hong Kong. It means, that it is less risky to invest in the
Japanese stock markets, but we get less return (50 times less). I would
suggest to invest in both depended on persons individual preferences (if
they are risk-averse or risk-neutral)

3. What other statistics would you calculate to help inform your

advice in question #2? (You don't need to do the calculations, just explain
what you would calculate, and how your results would affect your advice).

If we had some kind of forecast about the future economic changes

or expectations around the world, especially in the neighborhood
countries (i.e. exchange rates). Having a correlation coefficient between
the stock markets of countries who import and export a lot from these two
countries is also going to be helpful.