Many portfolio managers, when asked why they do not internationally diversify their portfolios, answer that “the risks are not worth the expected returns.” Using the theory of international diversification, how would you evaluate this statement?
Answer to relevant QuestionsThe benefits of portfolio construction, domestically or internationally, arise from the lack of correlation among assets and markets. The increasing globalization of business is expected to change these correlations over ...What are the advantages and disadvantages of serving a foreign market through a greenfield foreign direct investment compared to an acquisition of a local firm in the target market? What is the essence of the theory of comparative advantage? Explain briefly how economies of scale and scope can be developed in production, marketing, finance, research and development, transportation, and purchasing. Capital budgeting for a foreign project is considerably more complex than the domestic case. What are the factors that add complexity?
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