A Comparative Study of Equity and Bond Markets: UK, USA, Australia

This report provides a comparative analysis of the equity and bond markets in the UK, USA, and Australia. It begins with an introduction to the stock market and its significance in finance, emphasizing its role as a financial instrument and asset class. The report then delves into a detailed comparison of the stock markets of the three countries, highlighting the relationship between a nation's economic situation and its equity market performance. The analysis includes an examination of the returns generated by the equity and bond markets in each country, with a focus on the impact of government policies, economic conditions, and investor sentiments. The report discusses the factors influencing both bond and stock markets, such as liquidity, fundamentals, and investor sentiment. The conclusion summarizes the key findings, emphasizing the importance of various factors for a prospering stock market and the differences in returns offered by developed countries like Australia, USA, and UK. References to supporting literature are also included.

Equity and Bond
Market
Comparison of
UK,USA and
Australia.

Table of Content
• Introduction
• Comparison of Stock Markets
• Comparison of Bond Markets
• Conclusion
•References

INTRODUCTION
Stock Market is a very important concept in the field of
finance; it is one of the most used financial instruments. It is
regarded as a asset class which consist of risk and thus the
proportion of money that is being invested in other asset classes,
the same proportion does not come into equity markets. The
current report will going to have a detailed discussion on the overall
returns that has been generated by the equity as well as bond
markets of 3 countries that is Australia, UK and USA (Fifka, 2013).
This will help in getting a better view of the situation of stock
markets in these countries and the interests of investors within the
stock market can be effectively laid down through this presentation.

Comparison of Stock Market
Equity market of any nation is basically the mirror of economic
situation of a country. If the economic prospects as well as the policies of a
country are quite good, then it will result into a higher and effective stock
market that will lead to better growth as well as development of the whole
financial instruments market like bond market as well as the insurance
market that prevails within the boundaries of a nation. Stock market is
usually considered as a bit risky asset class as compared to any other asset
class like commodities or real estate, this is because the money that is
invested in equity is basically invested in businesses and thus the rate of
return in equity is like return in any other business, which fluctuates with
time. Thus, what is essential is to make sure that effective financial literacy
program is conducted by developed countries like Australia, UK and USA in
their respective countries in order to increase the penetration of domestic
savings within the stock market (Yunus, Hansz and Kennedy, 2012).

Rate of Return in Equity
and Bond Markets

Continued
Hence, It can be concluded from the above analysis of the returns generated by the
stock markets that Australian stock market has outperformed the stock markets of
UK and USA and thus it is essential to mention that the return offered by Australian
stock market was 7% and the other markets has a level of return ranging from 5.5%
to 6.5%.. This growth in Australian stock market was primarily due to the changes in
policy of Australian government to invest heavily in the infrastructure of the country
and promoting business growth and over all development that has translated into
business growth as well as earnings which lead to higher level of stock market
returns over period of time. USA, despite being one of the biggest country and having
all the resources in place, it faces various issues related to debt and lower saving
thus leads to recessionary phases. These recessionary phases though impacted the
global markets including the markets of Australia. But the Australian markets have
been able to give a fair return to its investors majorly due to its stable policies of
government to invest in the country’s core infrastructure and businesses (Loh, 2013).

Comparison of Bond Markets
Bond Market is one of the most important markets for a particular nation. It
is the market through which even a nation’s government raises money to
meet its needs related to investment and public expenditure. Thus a
government cannot afford to have a subdued Bond market that will not
attract investors. Bond market offers security to investors as the bond that
are being issued are usually by the top rated companies or by the
government and municipal commission themselves, hence these are some
of the trustworthy institutions on which a common investor can show faith
and expect a return as well as the repayment of the principal amount on
time, without any risk being there. A bond market usually going to attract
more capital as compared to equity market because general people consider
it as the safe haven and big mutual funds have their compulsion to maintain
a level of return for their investors and thus they try to hedge their risky
portfolios by investing heavily into government bonds as well as bills in an
effective manner over period of time.

Continued
Be it Bond Markets or Stock Markets it run on three major factors, these
includes Liquidity, Fundamental and Sentiments. Liquidity refers to the
funds and capital that is going to be attracted by these markets and which
will be lead to higher returns, second is Fundamentals that means if the
fundamental or the structural strength is there in the economy or financial
health of a nation then their stock or bond markets will eventually going to
flourish. The third and the important factor is sentiments (Mun and Brooks,
2012). If the sentiments of investor is hurt either through actions of the
government or through the bad economic situation of the nation, then it
can lead to a decline in the flow of funds and they will be risk averse, thus
a steep reduction in the rate of return can also take place. Thus it is quite
important to take care of all these factors in an efficient manner so that a
proper as well as smooth functioning of both bond and stock markets can
take place in the longer run (Rapach, Strauss and Zhou, 2013).

CONCLUSION
Thus, from the above discussion it can be said that the ultimate aim of any
nation is a prospering and nourishing stock market, where adequate return
on investment is offered. But in order to get the same various factors have
to be considered in an efficient manner. The rate of return that is offered by
developed countries like Australia, USA and UK are quite different. The
leader being Australia in equity markets growth with a growth of around 7%
and in Bond Market, The leader being USA with a return of around 2%.

REFERENCES
Fifka, M.S., 2013. Corporate responsibility reporting and its determinants in
comparative perspective–a review of the empirical literature and a meta‐
analysis. Business strategy and the environment. 22(1). pp.1-35.
Hoesli, M. and Reka, K., 2013. Volatility spillovers, comovements and
contagion in securitized real estate markets. The Journal of Real Estate
Finance and Economics. 47(1). pp.1-35.
Loh, L., 2013. Co-movement of Asia-Pacific with European and US stock
market returns: A cross-time-frequency analysis. Research in International
Business and Finance. 29. pp.1-13.