Lecture 11 Flashcards
1
Q
International investing
A
Additional diversification
additional risks (currency, political, regulatory, accounting)
2
Q
Home bias
Foreign Bias
A
Investors invest more in their home countries
Investors invest less in countries, which are far from home (geographically, economically, culturally, informationally)
3
Q
Interest parity relationship
A
( 1 + r)*(F/E) = 1 + r
4
Q
How to invest internationally
A
Directly, Investment vehicle (ADR, Funds), Derivatives
5
Q
To passively diversify portfolio
A
Indicies weighting through
- Market cap
- Beta against us or domestic country
- Country index standard deviation
Need expertise on currency and other factors
6
Q
International performance attribution
A
Currency selection
Country selection
Stock selection
cash/bond selection
