| Loading… |
Data. International and US exposure are proxied by three liquid ETFs instead of the underlying indices: EFA (iShares MSCI EAFE ETF) for developed markets ex-US, EEM (iShares MSCI Emerging Markets ETF) for emerging markets, and SPY (SPDR S&P 500 ETF Trust) for the US. Yahoo Finance's daily adjusted-close series (dividends and splits applied) gives a total-return comparison for all three in US-dollar terms. The ETFs already include the currency translation a US investor would experience, so no separate FX adjustment is applied. The ratio series is indexed to 100 at EEM's April 2003 inception, which sets how far back the page can go (EFA trades back to 2001 and SPY to 1993).
Dollar regimes. Each calendar month is classified by the trailing 3-month % change in EUR/USD (Yahoo Finance EURUSD=X, month-end close). A rise of more than 2% is "Dollar Weakening," a fall of more than 2% is "Dollar Strengthening," and anything in between is "Flat." EUR/USD is one currency pair, not a trade-weighted dollar index, so treat the regime split as a rough proxy for dollar direction. The idea being tested is that a weaker dollar should boost unhedged international returns (the translation effect). The regime averages below are a small, noisy sample (a couple dozen months per regime), so read them as suggestive, not conclusive.
Correlation. The scatter shows Pearson (OLS) and Spearman rank correlation, as on Factor Analysis and Small Cap vs. Large Cap Spread, so one or two extreme months can't carry the result. A low r² is expected. One currency pair rarely explains much of a monthly equity-return series, and the regression is there to show how weak or strong that single relationship is.
Refreshes once daily after the US market close, since index levels move every trading day. The EUR/USD monthly series is pulled in full each run.