[MUSIC] So welcome back for this sixth session on basic concepts in finance. So as in session two and session four now, what we'll do is look at real data to see what is going on when we look at real figures. So we learned that we should look at reward. We learned that we should look at risk. So now what we'll do is to extend that and look at the full picture, the full distribution. And Inez will introduce an example based on Belgium and Russia and she will take you to a new poll. >> So our poll is now simple, that you understand trade-off between return and risk. And what you have here is the average return on the Belgian index was at 2% for a risk of 8%. For Russia, the average return is about 4% but for a risk of 10%. So, which one is a better investment? You probably see that, based on what you learned, that the higher return to risk ratio for Russia would tell you that that's maybe a better investment. But let's look at the histogram of the distribution returns for these two countries. Let's start with Belgium. If you look at Belgium, so what we did is what Olivier told us. We have five years of monthly observations, so that's about 60 data. We distributed these data into five equal intervals, each of 5% width. And we see that there is a higher probability for having a return between 0 and 5%. But look at what's going on in the left date. There is this some probability of bad return. It can go as bad as negative 15% for Belgium. How about Russia? If I look at Russia actually, look at this k now is a bit different, so now the width is about 10% of each interval. So you see that for Russia, we have more of these returns that are skewing to the left, so we have more of this negative skewness. What's even more important is that we have a fat k, a higher probability of negative outcome, of a big loss. And that can go as bad as negative 40% so we have some probability of having a negative return between negative 20 and negative 40%. >> So thank you very much Inez for this very interesting analysis about Belgium versus Russia. So now let us investigate a second example and that second example will be about Japan and South Africa. >> So again, we're comparing a developing market and an emerging market and this time we're looking at the histogram of Japan. And you see a higher probability of having a return between 0 and 5% by looking at the histogram of Japan. And again, at least some probability of a negative, quite negative, return that goes up to negative 15%. So, we have, again, this mean that is pushed to the left, this left skewed distribution. Let's look at South Africa. What we see here is this higher probability of this negative return for South Africa and this is a fat k. So what we learned across this real data is that average return, risk, the day are different when we look at emerging market versus development markets. What we learn in the upcoming videos is that investing in emerging markets is quite challenging and we want to learn more about these challenges, and the benefits that we can get from investing into emerging markets. And now we let Olivier summarize the learning outcome of this video. >> So thank you very much Inez. So indeed, I will summarize very briefly, what we have learned in this video. So we learned, as Inez showed you, we learned about the average, so the real world. We learn about the viability, which is associated to risk. And we learn as well about fatiness and the fact that indeed you can have a high probability to have extreme events especially negative events which are called in finance crashes. And of course, as an investor what you would like to do is really to avoid to have a crash otherwise, you will never see these gold shoes again. >> And the Swiss watch. >> And the Swiss watch. [MUSIC]