Critically discuss the following statements A) “Recent research points to anothe

Question

Critically discuss the following statements

A) “Recent research points to another problematic aspect of international investing as well: When markets are the most volatile and investors most seek safety global diversification is of limited value.”

B) Some believe that an alternative to investing in foreign stocks is to invest in the shares of domestic multinationals. Critically examine this proposition and whether multinationals are likely to provide a reasonable substitute for international portfolio investment.

Explanation / Answer

A. Investing in international market is surely due to cases like hedging, speculation, arbitrage, spot and future market game. So that if market gets volatile diversification of portfolio with the expectated return may diverge from actual return. Hence, in this case any risk averse, neutral or risk lover would not like to invest much being rational. They would expect the market to be stable first and then, they would play the game. Hence, with volatile market, investment will go down.

B. Both are subject to portfolio investment belong to capital accounting. Hence, both can be treated equally.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.