Question

Investigating the stock market in emerging countries, we realized that there is a high variation in...

Investigating the stock market in emerging countries, we realized that there is a high variation in the Betas. what does this indicate?

Emerging markets have higher inflation

emerging markets do not have any risk

using international diversification might increase the portfolio risk

using international diversification might reduce the portfolio

Homework Answers

Answer #1

Answer-  

The correct Option is

Using international diversification might increase the portfolio risk

The portfolio with international diversification can carry increased risks due to economic and political instability in some emerging markets. There is the risk that emerging market's currency might depreciate in value against the U.S. dollar. Therefore there is lot of variation in Betas.

The other Options are incorrect.

Inflation does not effect Betas
Emerging markets have risk

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
26) Recent articles have cited the movement of U.S. investor wealth into Emerging Market stocks and...
26) Recent articles have cited the movement of U.S. investor wealth into Emerging Market stocks and into real estate investment trusts (REIT’s) here in the U.S. Analysts claim that both investment vehicles “offer a significant source of portfolio diversification”. Why might this be? (a) for each investment, the stand-alone volatility is now clearly lower than U.S. stocks (b) these investments now offer higher long-term rates of return (c) with low correlations with U.S. stock returns, these asset classes reduce portfolio...
5. We know that financial markets have a high degree of information asymmetry. Without the participation...
5. We know that financial markets have a high degree of information asymmetry. Without the participation of financial intermediaries in financial market transactions: a. Information and transaction costs would be lower b. Transaction costs would be higher but information costs would be unchanged c. Information costs would be higher but transaction costs would be unchanged d. Information and transaction costs would be higher 7. Which of the following is not a function of the financial markets? a. Transfer funds across...
Assume that we are living in a perfect capital market, there are no arbitrage opportunity, transaction...
Assume that we are living in a perfect capital market, there are no arbitrage opportunity, transaction costs or any other frictions. You are considering investing your money in two stocks. Stock A has no ideosyncratic risk. Stock B has high idiosyncratic risk. Which of the following statement is correct? A) Youwill require higher return on stock B, since it yields higher idosyncratic risk than stock A B) When market is booming, stock B has better return than stock A. When...
Jorge purchased a six-month put on CPZ stock at a cost of $150. The strike price...
Jorge purchased a six-month put on CPZ stock at a cost of $150. The strike price was $17. At what market price does Jorge just break-even on this investment? Ignore transaction costs and taxes. $15.50 $16.50 $17 $17.50 Phil is a bond fund manager. To hedge the bond portfolio against rising interest rates, Phil should: -buy Treasury Notes. -buy interest rate futures. -buy a stock-index future. -sell interest rate futures. Colleen has been trying to figure out what to do...
15. According to our class discussion of empirical findings in stock markets, which of the following...
15. According to our class discussion of empirical findings in stock markets, which of the following statements is (are) correct? (I) Poorly- or well-performing stocks tend to continue abnormal performance over short horizons. (II) Portfolios of high P/E stocks exhibit higher risk-adjusted returns. (III) Larger firms tend to have higher stock returns than smaller firms. (IV) Value stocks usually generate lower returns than growth stocks. (V) Stock prices of firms with negative earnings surprise tend to rise. (a) I only...
Case Study-1 In 1990s Nestlé faced significant challenges in its market growth. Despite of the stagnant...
Case Study-1 In 1990s Nestlé faced significant challenges in its market growth. Despite of the stagnant population in western countries the balance of power was increasing from large scale manufacturers like Nestlé, toward supermarkets and discounted chain stores. In result, Nestlé decided to lessen its focus on developed markets like North America and its home based market in Switzerland to emerging market like India and China. The driving force behind the decision of expanding its market share in emerging market...
Walt Davies and Shane O’Brien are district managers for Lee, Inc. Over the years, as they...
Walt Davies and Shane O’Brien are district managers for Lee, Inc. Over the years, as they moved through the firm’s sales organization, they became (and still remain) close friends. Walt, who is 33 years old, currently lives in Princeton, New Jersey. Shane, who is 35, lives in Houston, Texas. Recently, at the national sales meeting, they were discussing various company matters, as well as bringing each other up to date on their families, when the subject of investments came up....
"Risk' can be best defined as on the of the followings:   a. Variability of returns and...
"Risk' can be best defined as on the of the followings:   a. Variability of returns and probability of financial loss b. Chance of financial loss   c. Variability of returns   d. Correlation of relationship among two variables Which of the following statement is NOT TRUE when we argue that the idea of riskless arbitrage is to accumulate the portfolio with following conditions : a. Requires no net wealth invested initially   b. Invest in the long-term securities only where risk will be...
PLEASE ANSWER THEM ALL, WILL GIVE THUMBS UP 1) Which Statement is True? a) ABC Corp....
PLEASE ANSWER THEM ALL, WILL GIVE THUMBS UP 1) Which Statement is True? a) ABC Corp. has a return on investment (ROI) of 12% and a weighted average cost of capital (WACC) of 11%, while XYZ Corp. has an ROI of 10% and a WACC of 8%. In this situation, XYZ is performing better than ABC because XYZ is generating a higher Economic Value Added (EVA) b) If you were super rich and had a huge portfolio of stocks that...
QUESTION 21 One implication of the tradeoff theories of capital structure decision is that firms that...
QUESTION 21 One implication of the tradeoff theories of capital structure decision is that firms that are likely to pay taxes at high rates should carry more debt than firms in lower tax brackets. True False 1.00000 points    QUESTION 22 One implication of the tradeoff theories of capital structure decision is that risky firms, as measures by the variability of asset returns, ought to borrow more, other things equal. True False 1.00000 points    QUESTION 23 The pecking order...