1) What characteristics of foreign securities lead to diversification benefits for American investors?
2) Will increasing integration of national capital markets reduce the benefits of international diversifications?
3) Studies show that the correlations between domestic stocks are greater than the correlations between domestic and foreign stocks.
4) Explain why this is likely to be the case. What implications does this fact have for international investing?
5) Who is likely to gain more from investing overseas, a resident of the United States or of Mexico? Explain.
6) Suppose that Mexican bonds are yielding more than 100% annually. Does this high yield make them suitable for American investors looking to raise the return on their portfolios? Explain.
Write 175 to 350 words per question.