Henk Berkman and Ben Jacobsen, both based at the University’s Auckland campus, say international crises reduce world market stock returns by approximately 4% annually.
“Crises cause large and negative initial market reactions in their first month, lower than average returns during the remaining months, and partial recovery when they end.”
The pair say crisis or war risk is priced in stock markets.
“The economic significance of international crises is large. Measured in world market capitalization at the beginning of this century, an average crisis results in a value loss of approximately US$250 billion.”
In the introduction to their paper Jacobsen and Berkman say economists have largely remained silent on the topic of international crises and their impact on the economy.
Read the full paper “The World Price of War and Peace” see http://ssrn.com/abstract=828645 .
S&P gives OM-IP recommended status
It says the fact that these funds have historically done well gives investors comfort and confidence in the product and that the fund is a good for reducing portfolio risk. It is an 11-year fund with a capital guarantee provided by National Australia Bank.
S&P says that fees are on the higher end of the scale, but at least they are disclosed.
”As long as the return streams maintain their consistency and capacity does not affect returns, we feel this is one of those products in which you get what you pay for."
The latest details on the FPIA conference
FPIA conference committee chairman Lyn McMorran gives an update on this year's event.[MORE]
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