Would you expect the required rate rate of returns for a U.S investor in U.S common stocks to be the same as
the required rate of return on Japanese common stocks? what factors would determine the require rate of return for stocks in these countries?
Invstors demand a higher risk-free rate of return (which might correspond, for exmaple, to the 10-year T-bond rate) in countries where the inflation expectation is higher. This rate is currently higher in the US than (for exmaple) Europe and Japan, and our currency value with respect to the world's other major currencies is also falling.
The required rate of return for stocks tends to be higher than that for bonds, because of the higher volatility of stocks. Therefore two factors influencing the relative rate in different countries are 1: inflation expectation for the currency and 2: stock market volatility (usually represented by a "beta" coefficient). Most developing countries have a higher stock market beta than the USA. Japan suffered a major stock market collapse and slow recovery that has lasted over 20 years. Memories of this continue to affect investor confidence in Japan.
In conclusion, the required rate of return for US common stocks is likely to be higher than that for Japanese common stocks, due to the higher inflation expectation and stock market volatility in the US.
Well, it seems like the required rate of return for a U.S investor in U.S common stocks might not be the same as the required rate of return on Japanese common stocks. Firstly, we have to consider the inflation expectations in each country. If the U.S has higher inflation expectations, investors might demand a higher risk-free rate of return. That's right, inflation can really burst your bubble!
Another factor to take into account is the stock market volatility, my friend. The required rate of return for stocks tends to be higher than that for bonds, because stocks can be as unstable as a unicycle riding on a tightrope. So, the stock market volatility, often represented by a "beta" coefficient, can influence the relative rate in different countries.
Oh, and don't forget about the psychological impact, buddy! Japan went through a major stock market collapse and slow recovery that has lasted for over two decades. That kind of trauma can really affect investor confidence and make them demand higher returns. Poor Japan, they've been juggling financial troubles for quite some time.
So, in conclusion, factors like inflation expectations, stock market volatility, and historical market performance can determine the required rate of return for stocks in different countries. It's a wild world out there, my friend!
The required rate of return for a U.S investor in U.S common stocks is likely to be different from the required rate of return on Japanese common stocks due to several factors.
One factor is the inflation expectation in each country. Investors typically demand a higher risk-free rate of return in countries with higher inflation expectations. Currently, the inflation expectation is higher in the US than in countries like Japan. This can affect the required rate of return for stocks in each country.
Another factor is the stock market volatility, usually represented by a "beta" coefficient. The required rate of return for stocks tends to be higher than that for bonds because of the higher volatility of stocks. Developing countries often have a higher stock market beta than the US, which can result in a higher required rate of return for stocks in those countries.
In the case of Japan, investor confidence may be influenced by the memory of a major stock market collapse and slow recovery that has lasted for over 20 years. This can also impact the required rate of return for Japanese stocks.
Therefore, factors such as inflation expectations, stock market volatility, and investor confidence can determine the required rate of return for stocks in different countries.
No, the required rate of return for a U.S. investor in U.S. common stocks would not be the same as the required rate of return on Japanese common stocks. The required rate of return for stocks in each country is determined by several factors.
One factor is the inflation expectation for the currency. Investors demand a higher risk-free rate of return in countries where the inflation expectation is higher. Currently, the inflation expectation is higher in the U.S. compared to countries like Europe and Japan. Therefore, U.S. investors may require a higher rate of return to compensate for the higher inflation expectation.
Another factor is the stock market volatility, usually represented by a "beta" coefficient. Stocks tend to have higher volatility compared to bonds, and as a result, investors generally require a higher rate of return for stocks. Different countries may have different levels of stock market volatility, which can affect the required rate of return for stocks in those countries.
Additionally, historical events and investor confidence can also influence the required rate of return. For example, Japan experienced a major stock market collapse and slow recovery over the past 20 years. The memories of this event continue to affect investor confidence in Japan, which may result in a higher required rate of return for Japanese stocks.
In summary, the required rate of return for stocks in different countries is influenced by factors such as inflation expectation, stock market volatility, and investor confidence. As a result, the required rate of return for a U.S. investor in U.S. common stocks would likely be different from the required rate of return on Japanese common stocks.