On the riskiness of the world’s stock markets

The main aim of this paper is to study the riskiness of the world’s stock markets. This is carried out by applying the concepts of the two main asset pricing models: the Capital Asset Pricing Model and the Arbitrage Pricing Model. Certain obvious risk categories among world stock markets exist. Three major potential reasons for the existence of these different risk categories are reported. Firstly, economic trade and currency areas seem to affect the riskiness of different stock markets, with North American, European and Oceanic stock exchanges quite clearly creating their own separate factors. Secondly, the level of institutional development of a given stock market also appears to be a factor determining its riskiness. Thin stock markets, such as those of Finland and Mexcio seem to exhibit a different price behaviour of their own. Thirdly, the combined effect of different time zones and efficiency is discussed, especially in the case of the UK stock markets vs. other European stock markets.