Possible Outperformers in the Case of a "Fat-Tailed Event"
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Date updated:08-13-2007

See analysis here: http://www.stockpickr.com/members/port/Research-quot-The-Beta-Theory-quot-pt-1a-focus-international-equity-markets/

After having read that, we see the possibility of risky assets becoming excessively overpriced (due to financial innovation => greater stability => excessive risk taking; financial flows => bidding up of risky assets).

What countries/equities (bonds, money market instruments are excluded from this list) might outperform in the case of such an event? Look below for possiibilities...

Things I consider:
- Risk
- Liquidity

(if you can think of any more, please e-mail me, and I'll add them in)


By: Matthew

symbol name last price % change open
  • +
  • SPY
    S&p Dep Receipts
  • $109.62
  • +0.54%
  • $109.31

- High liquidity & market depth (Avg Vol: 127,403,000) - US company's are typically considered less risky (for accounting, regulatory, etc... reasons) - US maturity - Recent equity underperformance relative to other nations might allow for equity-specific outperformance (Annual 5-year returns = 7.5% In the end: you'll still be hit b/c it's a stock, but maybe you'll be hit less than if you were invested in - say - China...

People owning SPY also tend to own: DIAGOOGGRMNQQQQRHATUNYHOO

TheStreet.com Rating: No Rating What is this?

  • +
  • EWU
    Ishare Msci Uk In
  • $16.69
  • +1.34%
  • $16.58

- For a foreign index-based ETF, it has pretty good volume (Avg Vol: 563,000) - UK - like the US - is relatively safe and mature - Recent relative underperformance, as compared to other foreign countries' equity markets (14.65%) In the end: like the U.S., in the end, you'll still be hit b/c it's a stock, but maybe you'll be hit less than if you were invested in - say - China...

People owning EWU also tend to own: AMFAPFBDTBLNEWJGFGVT

TheStreet.com Rating: No Rating What is this?

  • +
  • IEV
    Ishare Sp Eur 350
  • $40.13
  • +1.26%
  • $39.91

- See "EWU" above - Avg Vol: 297,000

People owning IEV also tend to own: ADRUDEBDEWEFAFEUVGKACAS

TheStreet.com Rating: No Rating What is this?

  • +
  • DUK
    Duke Energy Cp Hl
  • $16.04
  • +0.19%
  • $16.03

- Relative safety of utilities + dividend yield => should leave it less harmed by such an event. Indeed, we'll always need energy, right?

People owning DUK also tend to own: AAPLDISGAPGEMSFTAAALL

TheStreet.com Rating: C+ What is this?

  • +
  • BRK-B
    Berkshire Hath Hl
  • $3411.00
  • +0.22%
  • $3412.00

- AAA-rated credit + low multiple + good utility exposure + Warren Buffett => gonna be ok in the long-run :-)

People owning BRK-B also tend to own: AEGAZINGINTCOPA.VORCLSDA

TheStreet.com Rating: No Rating What is this?

  • +
  • DVY
    Ishares Dow Sel D
  • $42.69
  • +0.64%
  • $42.50

- Solid liquidity (Avg Vol: 430,000.00) - Dividend yield should give it support

People owning DVY also tend to own: DLSDOWGEINTCMATUSTWFC

TheStreet.com Rating: No Rating What is this?

  • +
  • IWB
    Ishare Rus 1000 I
  • $60.09
  • +0.52%
  • $59.93

- Large-caps should outperform (relative to other equities) during such a time - Decent liquidity (Avg Vol: 282,000.00)

People owning IWB also tend to own: AAPLACHADRECEOCHLCOGOCTRP

TheStreet.com Rating: No Rating What is this?

  • +
  • EWJ
    Ishare Msci Japan
  • $9.58
  • +0.95%
  • $9.53

- High liquidity & market depth (Avg Vol: 23,825,000 ) - Japan - like the UK and the US - is mature - Recent equity underperformance relative to other nations might allow for equity-specific outperformance (Annual 5-year returns = 13.28%) In the end: the risk-reward balance of Japan - when combined with exposure to various other countries - seems to make it a decent investment

People owning EWJ also tend to own: BTUCOGTGRMNIFNJPMMSFTSSL

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