Global Investing and Market Indices Flashcards
Why do we invest globally?
1) Almost two thirds of all available investment opportunities lie outside U.S. borders
2) Returns - many foreign markets are set to post strong gains over the coming years
3) Diversification - All markets are subject to periods of bull and bear cycles
What variables do we need to consider relative to investing globally?
1) The probability distribution of historic returns
2) The co-movement among the different country returns
3) The risk of investing in the country
How can you participate in global investing?
1) Buying domestic companies that conduct global business
2) ADR’s
3) Mutual Funds
4) ETfs
5) Direct investment
What instrument represents the highest volume of money market trading?
Treasury Bills
Treasury Bills are sold at a ___________.
Discount
What instrument represents the second highest volume of money market trading?
Commercial Paper
Bankers acceptances are normally used in foreign trade where __________
the credit worthiness of one party is uncertain
What is a repurchase agreement?
- Sale of a money market security with the promise to repurchase always for a higher price
- Maturity is usually overnight
What is the federal funds rate?
Interest rate received on deposits with the federal reserve
What is the LIBOR?
London Inter-Bank Offered Rate: Rate at which large banks in London lend money to eachother
What is the brokers call money rate?
The rate brokerages pay for the money they loan out for margin transactions
How do you calculate a price weighted index value?
Where Pit is the price of a security on day t, and Dadj is a divisor that has been adjusted for stock dividends
How do you calculate a value weighted index?
Where Pit is the price of a security on day t, Qit is the quantity
What are examples of a price weighted index?
DJIA
Nikkei Dow
What are examples of a value weighted index?
S&P
NYSE Index
AME Index
Nasdaq
Wilshire 5000
Russel 1000
