International Finance and Accounting Handbook

11.4 RISK OF FOREIGN SECURITIES. Exhibit 11.3 presents the correlation between the equity markets of several countries for the p ...

11 • 7 United United Australia Austria Belgium Canada France Germany Hong Kong Italy Japan Netherlands Spain Sweden Switzerland ...

national diversification. The low correlation suggests that international diversifica- tion could reduce the risk on an investor ...

11.4 THE RISK OF FOREIGN SECURITIES 11 • 9 Stocks Domestic Risk Exchange Risk Total Risk Australia 13.94 8.66 17.92 Austria 24.8 ...

changes over time, affecting the return to a U.S. investor on an investment in German securities. The variability of the exchang ...

and the U.S. index and the standard deviation of each index. As discussed earlier, the correlations used in this analysis are ve ...

11 • 12 INTERNATIONAL DIVERSIFICATION To U.S. Stocks Own Country Exchange Gain Investor Australia 10.51 –2.82 7.69 Austria 2.37 ...

States. Thus, most internationally diversified equity portfolios would have had a lower return than the U.S. market index over t ...

or Norwegian point of view, the “Exchange Rate Expected Return” and “Risk” columns would be different, because they would contai ...

change fluctuations is clearest for long- and short-term bonds. Although we will not present the tables, the correlation coeffic ...

where R N is the expected return on the non-U.S. securities in dollars R US is the expected return on U.S. securities N is th ...

If we rearrange the expression (11.1), we have hold non-U.S. securities as long as^8 (11.2) As long as the expression in the las ...

tionally believe that returns are higher in their country relative to the rest of the world? The answer is yes! If governments t ...

While examining historical data is interesting, the real of test of international di- versification is the performance of funds ...

For the 20 funds the average beta is 0.64. For a similar sample in the 1980s the av- erage beta was 0.71. Thus, there is a fair ...

lios has been consistently found. Thus the risk characteristics of international funds that have been found in the past are like ...

The obvious strategy for an investor deciding to diversify internationally but not wishing to determine how to construct an inte ...

not present in pure domestic investment—country selection and exchange expo- sure.^12 The decision concerning how much to invest ...

each country’s stocks compared to the country’s bonds on the basis of current risk premiums and economic variables. They define ...

planation, extra risk, and an investment opportunity. The peso explanation is named after the investors who invested their money ...