The UK economy has performed independently of the US and eurozone countries since COVID-19 began, as the first edition of the “International Guide to Cost of Capital (IGCC) Summary Edition” from Kroll confirms. This 173-page work was released in conjunction with the CFA Institute Foundation last month and is available free of charge.
Highlights of this often-undesirable independence during this period include the overall stock market performance. Kroll notes the following returns as of 30 November 2021:
| Stock market | Overall performance since COVID-19 |
|---|---|
| FTSE 100 | -6.9% |
| STOXX Europe 600 | 10.2% |
| S&P 500 | 37.3% |
Ten-year government bond yields also vary widely, impacting valuation.
| Country | Yield as of 30 November 2021 |
|---|---|
| UK | 0.84% |
| Eurozone | -0.35% |
| China | 2.83% |
| US | 1.43% |
A further economic differentiator is annualized 3Q growth rates. The eurozone and the UK led most global economies comparing the most recent third quarter with 2020.
| Country | Annualized 3Q 2021 to 3Q 2020 growth rate |
|---|---|
| UK | 5.1% |
| Eurozone | 9.3% |
| US | 2.1% |
The Kroll “Summary Edition” examines the important difference in risk characteristics of investing in various countries and has the following seven chapters:
- “International Cost of Capital Overview”;
- “Strengths and Weaknesses of Commonly Used Models”;
- “International Equity Risk Premia”;
- “Country Yield Spread Model”;
- “Relative Volatility Model”;
- “Erb-Harvey-Viskanta Country Credit Rating Mode”; and
- “Firm Size and the Cost of Equity Capital in Europe.”