Yields and Risk of Selected Investment Instruments of the Czech Capital Market

Abstract

Purpose of the article: The object of the research is to determine real average yields and risks of selected investment instruments in Czech market for period 2003 to 2012. Purpose is to determine whether Czech capital market, although it’s still regarded for emerging, is from perspective of achieved yields and risks comparable with other developed capital markets. Methodology/methods: The calculation of yields and risks is done for short-term and long-term government bonds, corporate bonds and shares. Bond yields are calculated as gross yields to maturity, share yields are determined from values of PX index. Values of nominal, real yield and risk premium are determined. Values of risk are calculated as standard deviation and coefficient of variation. Data are from Czech National Bank and Prague Stock Exchange. Scientific aim: The aim of analysis is to determine whether the results achieved in Czech market in the years 2003 to 2012 correspond to theoretical knowledge and results achieved in developed capital markets. Values are compared both mutual comparison and also in comparison with American capital market. Findings: Real values of yields and risks of Czech investment instruments confirm theoretical findings that higher nominal appreciation of investment means its bigger risk. The best are medium and long-term government bonds, which gain relatively best values of both of investment criteria. From comparison of instruments in Czech and American market implies that sequence of nominal, real yields and risk premiums is identical. Risk is considerably larger in the USA. Conclusions: Absolute, brutto values of yields and risks are higher in American market than Czech. Nevertheless comparable relative differences between yields of differently risk instruments show a certain degree of maturity of Czech market in examined period. More detailed analysis requires determination of netto values, ie net yields taking into account transaction costs and tax burden.