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7. Appendices
Appendix 1: Country characteristics
Country
Average MSCI country equity index ret. (p/a)1
GDP (in Billion US$)2 CAGR of GDP (p/a)2 Average Inflation (p/a)2 Oil Consumption3,4 Oil
Production3,4 Oil surplus 3,4 Oil surplus/ GDP (barrels per 1000 US$ GDP) Oil dependency (barrels oil per 1000 US$ GDP) '95-'06 2006 '95-'06 '95-'06 2005 2005 2005 2005 95-'05 avg. Argentina* 4.7% 212.7 -1.7% 5.5% 421 725 304 0.610 0.667 Australia 8.4% 754.8 6.7% 2.8% 884 554 -330 -0.169 0.666 Austria 9.9% 321.9 2.7% 1.6% 294 0 -294 -0.351 0.410 Belgium 8.9% 393.6 3.2% 1.8% 809 1718 909 0.890 0.892 Brazil* 7.9% 1067.7 3.0% 12.7% 1819 0 -1819 -0.753 0.922 Canada 14.1% 1269.1 7.2% 2.0% 2241 3047 806 0.260 0.967 Chile* 2.0% 145.2 6.7% 4.2% 257 0 -257 -0.790 1.076 China* -8.4% 2630.1 12.4% 2.9% 6988 3627 -3361 -0.547 1.378 Colombia* 12.5% 135.1 3.5% 11.3% 230 549 319 0.945 0.950 Czech Republic* 15.5% 141.8 8.9% 4.7% 211 0 -211 -0.620 0.890 Denmark 14.2% 276.6 3.9% 2.1% 189 377 188 0.265 0.403 Egypt* 21.9% 107.4 5.4% 5.3% 616 696 80 0.325 2.413 Finland 15.5% 210.8 4.4% 1.4% 233 0 -233 -0.434 0.567 France 10.1% 2231.6 3.2% 1.7% 1961 0 -1961 -0.337 0.450 Germany 7.3% 2897.0 1.3% 1.4% 2586 0 -2586 -0.338 0.442 Greece 10.9% 307.7 6.9% 3.7% 429 0 -429 -0.551 0.794 Hong Kong 3.5% 189.5 2.5% 1.0% 285 0 -285 -0.585 0.512 Hungary* 22.6% 114.3 8.9% 11.5% 151 0 -151 -0.493 0.844 India* 6.1% 886.9 8.7% 6.2% 2485 784 -1701 -0.795 1.580 Indonesia* -5.5% 364.2 4.5% 13.7% 1168 1136 -32 -0.041 1.809 Ireland 8.1% 222.1 11.5% 3.0% 196 0 -196 -0.356 0.515
Israel* 13.5% 140.2 3.7% 4.4% n/a 0 n/a n/a n/a
Italy 9.2% 1852.6 4.6% 2.7% 1809 118 -1692 -0.348 0.538
Japan -0.9% 4367.5 -1.7% 0.0% 5360 0 -5360 -0.429 0.459
Jordan* 13.4% 14.3 7.1% 2.9% n/a 0 n/a n/a n/a
Sources: 1) Datastream 2) IMF World Economic Outlook Database, 2007 3) British Petrol Statistical Review of World Energy 2006
53
Country
Average MSCI country equity index ret. (p/a)1
GDP (in Billion US$)2 CAGR of GDP (p/a)2 Average Inflation (p/a)2 Oil Consumption3,4 Oil
Production3,4 Oil surplus
3,4 Oil surplus/ GDP (barrels per 1000 US$ GDP) Oil dependency (barrels oil per 1000 US$ GDP)
'95-'06 2006 '95-'06 '95-'06 2005 2005 2005 2005 95-'05 avg.
Korea* 5,2% 888,3 5,0% 3,6% 2308 0 -2308 -1,064 1,478
Malaysia* -4,2% 150,9 4,9% 2,6% 477 827 350 0,976 1,671
Mexico* 13,1% 840,0 10,3% 13,4% 1978 3759 1781 0,847 1,255
Morocco* 8,3% 57,4 5,2% 2,2% n/a 0 n/a n/a n/a
Netherlands 7,4% 663,1 4,3% 2,3% 1071 0 -1071 -0,621 0,728 New Zealand 3,3% 103,4 5,0% 2,2% 152 0 -152 -0,512 0,729 Norway 9,3% 335,3 7,7% 2,1% 213 2969 2756 3,334 0,409 Pakistan* -0,3% 129,0 5,2% 7,0% 353 0 -353 -1,161 1,565 Peru* 9,3% 93,3 5,2% 4,8% 139 111 -28 -0,129 0,926 Philippines* -12,1% 116,9 4,1% 6,4% 314 0 -314 -1,165 1,613 Poland* 9,0% 338,7 8,4% 8,9% 478 0 -478 -0,576 0,785 Portugal 6,8% 195,0 5,1% 2,9% 320 0 -320 -0,629 0,855 Russia* 23,3% 979,0 10,9% 39,9% 2753 9551 6798 3,248 2,514 Singapore 0,4% 132,2 4,2% 0,9% 826 0 -826 -2,583 2,652 South Africa* 5,7% 255,2 4,9% 6,0% 529 0 -529 -0,798 1,128 Spain 14,4% 1225,8 6,8% 3,1% 1618 0 -1618 -0,524 0,723
Sri Lanka* -2,0% 26,8 6,8% 8,4% n/a 0 n/a n/a n/a
Sweden 13,5% 385,3 4,0% 1,5% 315 0 -315 -0,321 0,442 Switzerland 11,4% 377,2 1,6% 0,9% 262 0 -262 -0,261 0,330 Taiwan* -3,2% 355,7 2,4% 1,2% 884 0 -884 -0,931 0,976 Thailand* -10,8% 206,3 1,9% 3,6% 946 276 -671 -1,390 1,994 Turkey* 17,0% 392,4 8,1% 50,6% 650 1808 1158 1,166 1,116 UK 7,0% 2373,7 6,9% 1,7% 1790 0 -1790 -0,293 0,406 United States 10,6% 13244,6 5,4% 2,6% 20655 6830 -13825 -0,405 0,728 Venezuela* 0,8% 181,6 8,1% 33,6% 553 3007 2454 6,244 1,821
World total 6,7% 48144,5 4,6% 5,5% 82459 81088 -1371 n/a n/a
Sources: 1) Datastream 2) IMF World Economic Outlook Database, 2007 3) British Petrol Statistical Review of World Energy 2006 Notes: 4) In barrels (x1000) of oil per day 5) Shaded cells indicate IMF staff estimate 6) MSCI country index return per year
54
Appendix 2: Uncorrelated factors
Procedure for reducing the multi-factor model to a multi-factor model with uncorrelated factors. A general approach is presented, illustrated with a two-factor model9. Let
i i i i i F F R =
α
+β
+β
*+ε
2 * 2 * 1 * 1 *Where for example F1* is the change in the Brent oil price and F2* is the return of the world MSCI index. If
the factors are correlated, the correlation may be removed from either factor. Define F1* as equal to F1. To
remove the impact of the Brent oil price from the world MSCI index the parameters of the following equation can be established via regression analysis:
t
d F F* = 0 + 1 1+
2
γ
γ
where γ0 is a constant, γ1 the sensitivity with F1 and dt the random error term. By the techniques of
estimation used in regression analysis, dt is uncorrelated with F1. Thus
1 1 * 2 0 F F dt+
γ
= −γ
captures the performance of the world MSCI index with the effect of F1 (the Brent oil price) removed. If:
1 1 * 2 0 2 d F F I = t +
γ
= −γ
the factor I2 is defined. It captures the performance of the world MSCI index that is uncorrelated with the
Brent oil price. Solving for factor F2* and substituting into the return equation yields
i i i i i i i F F F R =
α
+β
+β
+β
γ
+β
*γ
1 1+ε
2 0 * 2 2 * 2 1 * 1 *Rearranging the terms gives
i i i i i i i F F R =
α
+β
γ
+β
+β
γ
+β
* 2+ε
2 1 1 * 2 * 1 0 * 2 * ) ( ) (The first term is a constant we define as αi. The coefficient on the second term is a constant we define as βi1.
Now let βi2 = βi2*. Then this equation becomes
i i i i i F F R =
α
+β
1 1+β
2 2+ε
where F1 and F2 have been defined so that they are uncorrelated.55
Appendix 3: Main variable graphs
-.008 -.004 .000 .004 .008 .012 .016 .020 95 96 97 98 99 00 01 02 03 04 05 06 INFL -.015 -.010 -.005 .000 .005 .010 .015 95 96 97 98 99 00 01 02 03 04 05 06 INDPR -.010 -.005 .000 .005 .010 .015 .020 95 96 97 98 99 00 01 02 03 04 05 06 CONF -.4 -.3 -.2 -.1 .0 .1 .2 .3 .4 95 96 97 98 99 00 01 02 03 04 05 06 BRENT -.05 -.04 -.03 -.02 -.01 .00 .01 .02 .03 .04 95 96 97 98 99 00 01 02 03 04 05 06 EXR -.20 -.15 -.10 -.05 .00 .05 .10 95 96 97 98 99 00 01 02 03 04 05 06 WORLD -.03 -.02 -.01 .00 .01 .02 .03 95 96 97 98 99 00 01 02 03 04 05 06 TIMEHOR
