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
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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

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