The Relative International Diversification Benefits Of Adrs Essay

The goal of this case is to help Sandra Meyer develop a presentation to address Henry Bosse’s concerns about international investments. The general idea is to demonstrate to Henry the benefits of international diversification, if any. To achieve this goal, you need to have a view on 1) the impact of foreign exchange (FX) rates on the return and risk of international investments, and 2) the impact of having more assets on the return and risk of the investment portfolio To form views on these two points, answer the following questions: I. The impact of FX rates on the risk and return of foreign investments 1a) Using data in Appendix A, calculate the

Advisors and investors would do well to pay as much attention to the expected volatility of any portfolio or investment as they do to anticipated returns. Moreover, all things being equal, a new investment should only be added to a portfolio when it either reduces the expected risk for a targeted level of returns, or when it boosts expected portfolio returns without adding additional risk, as measured by the expected standard deviation of those returns. Lesson 2: Don’t assume bonds or international stocks offer adequate portfolio diversification. As the world’s financial markets become more closely correlated, bonds and foreign stocks may not provide adequate portfolio diversification. Instead, advisors may want to recommend that suitable investors add modest exposure to nontraditional investments such as hedge funds, private equity and real assets. Such exposure may bolster portfolio returns, while reducing overall risk, depending on how it is structured. Lesson 3: Be disciplined in adhering to asset allocation targets. The long-term benefits of portfolio diversification will only be realized if investors are disciplined in adhering to asset allocation guidelines. For this reason, it is recommended that advisors regularly revisit portfolio allocations and rebalance

“The Benefits of diversification are clear. Portfolio theory has played a crucial role in explaining the relationship between risk and return where more than one investment is held. It also enables us to identify optimal and efficient portfolios.”

commercial real estate markets (e.g., Chan, Hendershott, and Sanders, 1990, Ling and Naranjo, 1996, 1999, Ling, Naranjo, and Ryngaert, 2000, and Karolyi and Sanders, 1999).3 In an international context, several studies have found that continental and country specific factors, such as exchange rate risk, are additional sources of systematic risk (e.g., Eichholtz, et al., 1998, and Liu and Mei, 1996). Therefore, to appropriately measure both domestic and international real estate return performance, it is necessary to adequately control for country specific sources of systematic risk. To form a base-line, we first examine the ex post return performance of each country’s real estate securities using a single-βeta asset pricing model. Our proxy for the world wealth portfolio (i.e., systematic risk) is the total return on a broad-based index of international stocks. The estimated (Jensen’s) alphas from these regressions provide direct evidence of abnormal riskadjusted return performance. In addition, the estimated βeta coefficients and coefficients of determination provide evidence on the extent to which country specific real estate returns respond to a global market risk factor. If returns on real estate securities in country i are heavily influenced by a world-wide risk factor, this may suggest that investors already diversified internationally with stocks will gain little additional

• Managed growth or capital growth funds—structured to maximise the return from capital growth, that is, an appreciation in the value of the assets held. Less emphasis on income receipts. Higher risk profiles within an investment portfolio; therefore, will usually hold a higher percentage of funds in equity investments and a much smaller portfolio of fixed interest investments.

A. The composition of the optimal international portfolio is identical for all investors, regardless of home country

The International Growth Fund annual report that ended in August 31, 2009 showed that 94% of the Funds portfolio was invested in 177 non U.S. stocks and 6% was in temporary cash investments. All values are presented in the tables.

Mutual fund has been existing for a long time, but there are still a lot of details about it are not very clear. Generally, this paper is discussing not only the overall performance of mutual funds, but also the functions of each subpart and how are they related to each other. Specifically, there are several questions been answered: how is mutual funds’ overall performance? What is the factor that affects its behaviour the most? How does each composition affect the overall performance? Will there be any differences between the actively managed funds and passively managed funds? How are mutual funds’ performance compared with other market index during the past, specifically from 1975 to 1994? How to understand the fund’s performance by looking at the correlations and so on? By studying these questions separately, a better understanding of mutual funds and their properties will be obtained.

The correlation between the market portfolio and HML and the correlation between intercept and HML is -0.335 and -0.070, which indicates a moderate negative relationship between market portfolio and HML, and weak negative relationship between intercept and HML. Also, the correlations between the market portfolio and SMB, and between the SMB and HML are 0.348 and 0.191 respectively, which means that there are some positive relationships between them.

EHRLICH, J. H. (1986). INTERNATIONAL OF STOCK MARKETS: POTENTIAL PROBLEMS FOR UNITED STATES SHAREHOLDERS. J. INT'L L. & BUS.

building strategies to invest in the emerging markets of the Exotican continent, with the primary

Some studies do examine the portfolio management along with the market volatility, impact however; the scope is often limited to a Bangalore. This study takes a look at the awareness of Mutual fund industries its growth in India. If one considers the transactions by domestic mutual funds (MFs) in the equity market an indicator of domestic investor participation in the stock market, domestic investors have been active participants in recent times. But the common perception that domestic investors lack market-moving influence is not entirely based on fact.

Being unfamiliar with Asian emerging markets, the client would like to start by trading with the Asian emerging market stock indexes. The client believes that that trading stock indexes is more advantageous in the emerging market as the constituents of the large

Investing in emerging markets offer tempting advantages to investors. The volatile economies of countries considered to be in this category have a potential for extraordinary returns. A caveat to investors considering opportunities in emerging markets are the presence of unstable governments, the chance of nationalization, poor property rights protection, and large swings in prices. Emerging markets are far from a sure thing. But, despite high individual risk, emerging markets can reduce portfolio risk. The volatile economies of these countries have such low correlations compared to the domestic market that they actually provide the greatest degree of diversification.

The idea that these countries have a high potential for growth is why many institutional investors have taken a keen interest in investing in emerging market hedge funds. Emerging market hedge funds are invested in a variety of different investments – from basic