Stocks for the Long Run : the Definitive Guide to Financial Market Returns and Long-term Investment Strategies

ate gains.^24 As a result, the vast majority of these IPOs are classified as “growth” stocks. Certainly there have been some big ...

Even in years such as 1971 when the big-winning stocks Southwest Airlines, Intel, and The Limited Stores all went public, a port ...

products for the management of Internet traffic, went public on July 28, At the time of the offering, the firm had never sold a ...

of extreme crisis, and that investors demand a premium to hold value stocks in case those circumstances arise. Indeed, value sto ...

and size effects we see in the historical data, another assumption needs to be added: that price movements caused by these liqui ...

This page intentionally left blank ...

10 CHAPTER GLOBAL INVESTING AND THE RISE OF CHINA, INDIA, AND THE EMERGING MARKETS Today let’s talk about a growth industry. Bec ...

tries in which investors can accumulate wealth. At the end of World War II, U.S. stocks comprised almost 90 percent of the world ...

163 FIGURE 10–1b The 2006 World GDP FIGURE 10–1c The 2007 World Equity ...

But this very unequal distribution of output and capital will not last. The emerging nations’ share of output and equity capital ...

These differences in returns emphasize the importance of maintaining a well-diversified world portfolio. The Japanese Market Bub ...

The Emerging Market Bubble The collapse of the Japanese market shifted the emphasis of global en- thusiasts to emerging markets— ...

The collapse of these economies dimmed investors’ enthusiasm for foreign investing. But troubles were also brewing for U.S. inve ...

DIVERSIFICATION IN WORLD MARKETS Principles of Diversification It might surprise investors that the principal motivation for inv ...

expected return in each country and the expected correlation between returns of the U.S. market and these emerging countries. On ...

risks. This is because these variables are not perfectly correlated, so movements in the exchange rate and the local stock marke ...

represented about 57 percent, and the U.S. stocks represented 43 percent of this world portfolio based on market values. The est ...

This last result is of particular note. Using historical data, an in- crease in correlation between U.S. and EAFE returns lowers ...

Should You Hedge Foreign Exchange Risk? Since foreign exchange risk does add to the dollar risk of holding foreign securities, i ...

in price. But even after the tech bubble popped, sector correlations were lower than before. One reason for the decreased correl ...