Chapter 14 - International Investing Flashcards
How much did international equity investing represent of an average individual’s equity allocations in the mid-1970’s?
Less than 1%.
Which two finance and capital market theories are the large attributors to the rapid growth in international investing over the last 40 years?
CAPM
Modern Portfolio Theory
What is currently happening to the correlation of the world’s capital markets?
We’re starting to see high and increasing correlation.
How much does Canadian equity market capitalization contribute to the overall capitalization of global equity markets?
Of the $98.9 trillion (US), CDN markets contributed roughly 3% (at the end of 2022). The Americas make up nearly half (44%) of the total global market share).
How has the global market share between the Americas, EMEA (Europe, Middle East, Africa) and Asia-Pacific changed since 2000?
Market share in Americas and EMEA has decreased relative to Asia-Pacific, which has increased significantly.
What is the MSCI EAFE?
Europe, Australasia, and Far East index - the most popular equity market index by a substantial margin, representing developed markets excluding the US and Canada. (21 countries)
What does it mean that the MSCI EAFE is a “free float” market capitalization index?
The weight of each company in the index is based on the current number of shares readily available, not the shares outstanding (some of which may be in restricted bands).
How does the MSCI EAFE index break down the different market capitalizations?
Investable Market Index is the top 99% of market capitalization, the EAFE Standard Index is the top 85%, the EAFE large cap is the top 70%.
What is the S&P BMI?
S&P Global Broad Market Index includes over 14,000 stocks from 25 developed markets and 24 emerging markets. It’s a float-adjusted market cap-weighted index.
What is the S&P Global 1200 Index?
Contains 1200 stocks that comprise approximately 70% of the world’s capital markets. It does have over a 50% weighting in US-based companies.
What are the different risks of international investing?
- Expenses
- Liquidity risk
- Legal and accounting bases
- Shareholder communications
- Foreign exchange risk
- Sovereign risk
- Tax risk
What is an American Depository Share (ADS)?
More efficient method of direct international investment. Like buying a company’s stock but in investor’s domestic exchange.
ADS is an exchange-listed share of a trust whose sole purpose is to hold a certain number of common shares of the issuer’s stock.
Why has the ADS market not seen major growth?
Rather than issuing ADSs, companies are listing their stock directly on foreign exchanges to make their shares more accessible to foreign investors.
What are the types of ETFs with international or global investment mandates?
Broad-based international ETFs
Regional ETFs
Individual country ETFs
Foreign-style ETFs
International bond ETFs
Foreign dividend ETFs
Foreign currency ETFs
Commodity-themed ETFs
How do broad-based international ETFs differ from other international ETFs?
Broad investment mandate, often passively track widely used international equity indexes.
What are regional ETFs?
International ETFs that provide exposure to a specific region or group of international equity markets, such as the BRIC, Asian-based, Latin American-based, European-based, etc.
What are “foreign-style” ETFs?
Cater to those who want international exposure using specific investment styles, such as small cap, growth, value, etc.
