impediments to international investment

Question 1

prior to investing abroad, must take into account…

Answer 1

the variety of instruments that currently exist, including stocks, bonds, treasury bills, futures, options, etc.

Question 2

psychological barriers

Answer 2

unfamiliarity with foreign markets, customs and language. Investors feel uneasy doing business in other countries and investing in domestic companies.

Question 3

information

Answer 3

information on foreign companies may be difficult to obtain.

Question 4

legal restrictions/regulations

Answer 4

institutional investors are often constrained with respect to their foreign investments

Question 5

Various costs

Answer 5

overall costs of foreign investment can be high.

Question 6

Economic and exchange risk

Answer 6

foreign investments bear risk of local market and foreign exchange risk.

Question 7

government intervention

Answer 7

i) taxation
ii) Political risk

Question 8

Market efficiency

Answer 8

some markets are very small; others have many assets traded in large volumes. hence, in some markets it may be difficult to sell a large stake quickly and without moving price.

Question 9

Varying accounting standards

Answer 9

different countries employ different accounting principles.